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By David Segal
Washington Post Staff Writer
Wednesday, November 4, 1998; Page B12
Hoping to curb a product they considered
dangerous, two Richmond mothers last year decided to
launch a class action lawsuit against the makers of a
lice-fighting shampoo. In early 1997, they retained
lawyer Mark M. Hager, a professor at American University,
to champion their cause.
But according to the D.C. Office of Bar
Counsel, the group that prosecutes lawyer misconduct,
Hager didn't file suit against Warner-Lambert Co., the
maker of Nix lice shampoo. Instead, he met with Warner-Lambert's
attorneys and cut a deal for himself and his co-counsel:
In exchange for $225,000, Hager agreed to drop the matter
and hand over the names of 90 consumers interested in
joining the suit, the Bar Counsel alleges.
Those allegations are part of ethics
charges filed recently against Hager, who teaches torts
and labor law at American's Washington College of Law. A
hearing on the matter is scheduled for Nov. 23. Hager
referred calls to his attorney, Mark Foster, who declined
to comment. D.C. Bar Counsel officials also declined to
elaborate on their charges, citing a policy against
discussing cases before they are resolved.
It's common for law professors to
moonlight as litigators, so Hager, who is a frequently
quoted expert on product-liability matters, must have
seemed like an ideal attorney for Debra Duke and a
neighbor. In early 1997, the two retained Hager and
another lawyer -- who is not named by the Bar Counsel --
to investigate potential grounds for a class action suit
in federal court against Warner-Lambert.
The mothers believed that Nix was both
ineffective and dangerous to children, and they sought to
sue on behalf of consumers to win refunds and other
damages from the company.
Americans spend about $100 million
annually on lice-treatment products, and Nix is among the
most popular brands in the business, according to the
National Pediculosis Association.
The case was to cite breach of warranty,
among other claims. Warner-Lambert says the product is
both safe and effective. In April 1997, Hager was
collecting the names of consumers willing to join the
plaintiffs' case, according to the Bar Counsel. By June,
roughly 50 people had signed up and 40 more were ready to
join the potential class, close to the 100 required by
law. But the following month, the Bar Counsel contends, Warner-Lambert
heard about the proposed class action and initiated
discussions with Hager. Though the Bar Counsel's charges
don't explain how, Duke and her neighbor soon learned
about their agreement and filed a grievance.
The Bar Counsel has alleged that Hager
violated 10 of its Rules of Professional Conduct. Among
the violations, the group said, were failing to abide by
a client's decisions, knowingly using a secret to a
client's disadvantage and engaging in "conduct
involving dishonesty, fraud, deceit." With appeals
likely, a resolution in the case could be as much as
three years away, Bar Counsel officials said. Staff
researcher Richard Drezen contributed to this report.
© Copyright 1998 The Washington Post
Company
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American
University Professor Faces Ethics Charges |
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By Siobhan Roth
Legal Times Staff Writer
Week of January 18th, 1999; page 2
An American University law professor
defended himself in a two-day disciplinary hearing last week against charges
that he sold out his clients in an aborted class action.
Last June, the D.C. Office of Bar Counsel,
which prosecutes ethics cases here, accused Mark Hager, a tenured professor at
the Washington College of Law, with 11 violations of the D.C. Rules of
Professional Conduct.
The case, which apparently raises novel
ethics issues under the D.C. rules, stems from a confidential deal, which
included $225,000 in attorney fees, that Hager and his Boston co-counsel reached
in 1997 with the Warner-Lambert Co., the pharmaceutical giant that was the
target of their clients' complaints.
It is undisputed that Hager achieved for
his clients the full relief that they could have won in court. Bar counsel's
primary charge, however, is that Hager violated ethics rules by resolving the
matter, before a complaint was filed, without informing his clients.
At last week's hearing before a
three-person committee of the D.C. Board on Professional Responsibility, it
appeared that the outcome of the ethics case was likely to turn on the arcane
issue of whether the deal struck between Hager and Warner-Lambert lawyers was a
"settlement agreement."
Senior Assistant Bar Counsel Elizabeth
Herman, prosecuting Hager, argued at the hearing that Hager violated ethics
rules by entering into the agreement, which included refunds, a money-back
guarantee on the product, and a pledge by Hager not to sue the company without
his clients' consent. She also charged that it was dishonest of Hager to
withhold information from his clients when they inquired about the agreement.
Hager's lawyer, Mark Foster, told the
panel that his client couldn't have done anything wrong because there are no
rules against the actions he undertook.
"I argue that there is no rule that
applies in this situation," said Foster, a former board chairman who is now
a partner at D.C.'s Zuckerman, Spaeder, Goldstein, Taylor & Kolker.
"These are uncharted waters."
If that assessment proves correct, the bar
might act to rectify the situation.
"If as a result of this proceeding it
appears that there is some gap in the rules, we have a committee whose job it is
exclusively to think about changes to the rules and recommend changes to the
bar," says Daniel Joseph, chairman of the Rules of Professional Conduct
Review Committee of the D.C. Bar and a partner at Akin, Gump, Strauss, Hauer
& Feld. Joseph declines to comment on the specifics of Hager's case.
And tort reformers seize the case as
another example of overreaching by lawyers at the expense of their clients.
"The absence of disclosure by the
attorney breaks down the one-on-one relationship of the client and the lawyer,
and increases the imbalance of power," says Victor Schwartz, a partner at
Crowell & Moring who is also general counsel of the American Tort Reform
Association.
If the committee finds that Hager did
violate ethics rules, the sanctions would almost certainly not reach the level
of suspension, given Hager's clean record. Instead, reprimand or public censure
is the more likely penalty.
It also is unclear what repercussions, if
any, Hager might face at AU. "The Washington College of Law places highest
importance on issues of ethical and professional responsibility," says law
school spokesperson Kathy Etemad. "Because it's a pending matter before the
disciplinary board, it would be inappropriate to comment at this time."
But at other law schools, bar discipline against a faculty member often results
in an internal proceeding to decide whether the school should also take action
against the professor.
The matter has its roots in early 1997,
when Erika Littlewood, a Richmond, Va., resident and an acquaintance of
Hager's, asked him to look into filing suit over the alleged ineffectiveness of
NIX, Warner-Lambert's anti-lice shampoo.
NIX was advertised as "99 percent
effective," but Littlewood found that it had failed to eradicate lice
contracted by her children.
After learning of studies that identified
strains of lice that are resistant to permethrin, the pesticide found in NIX,
Littlewood called Warner-Lambert. The company allegedly dismissed the
possibility of permethrin-resistant lice and advised her that the chemical's
effectiveness might be compromised by using certain hair conditioners or
swimming in chlorinated water, information not included in the product
packaging.
Littlewood asked the company to include
more complete information in the packaging, but Warner-Lambert declined,
offering to refund her money. Without receipts, however, she could only claim a
fraction of the money she'd spent on NIX.
Hager, who has maintained a mostly pro
bono, part-time practice since joining AU's faculty in 1988 as a professor of
constitutional law and torts, told Littlewood that he would be interested in
pursuing a class action against Warner-Lambert. Hager testified that he had
never handled a class action before.
Littlewood, Hager, and Boston solo
practitioner John Trafficonte, a classmate of Hager's at Harvard Law School,
then set about to find the 100 plaintiffs they would need to qualify for class
certification.
Sixty consumers signed a contingent fee
agreement that stated, "The attorneys will investigate potential bases for
a class action . . . seeking refund of the purchase price, and other damages,
based on certain claims, including breach of warranty." The agreement
also states that attorney fees may be paid "directly by the defendants to
the attorneys."
By July, there still were not enough
plaintiffs to seek certification as a class, and the lawyers were becoming
concerned.
"We never imagined that it would be
so difficult and take so long," Hager testified at the hearing.
The attorneys also were worried that they
lacked the requisite scientific background to succeed in the case.
"For every product failure, there are
three or four factual explanations," Hager testified. "Because the
other explanations are always out there, we were afraid of not getting
[certified] on a factual basis."
What's more, there was the possibility
that the suit would be dismissed even if the court did certify the class. Under
the Magnuson-Moss Act, which Hager and Trafficonte planned to invoke,
Warner-Lambert would have the right to "cure" the dispute by issuing
refunds to the plaintiffs, thus ending the case.
By July 1997, the company had already
removed the claim of 99 percent effectiveness from the NIX box. At about the
same time, Hager testified, Warner-Lambert found out that a suit was brewing,
and company counsel Karel Zaruba contacted Trafficonte to see if there was a way
to resolve the matter before litigation.
On Aug. 8, Hager and Trafficonte reached
the deal with Warner-Lambert that became the focus of the ethics case.
In the resolution, entitled
"Settlement Agreement," Warner-Lambert granted unlimited refunds for
the lawyers' 90 clients, agreed to create a scientific panel to investigate
pesticide-resistant lice, offered a money-back guarantee to future purchasers of
NIX, and agreed to pay Hager and Trafficonte $225,000 in fees. In return, the
lawyers agreed not to sue Warner-Lambert and not to divulge the fact or the
amount of the attorney fees to anyone, including their clients, Hager testified.
Hager and Trafficonte furnished
Warner-Lambert with the names of the 90 would-be plaintiffs, while insisting
that they retained the right to sue if the company reneged on the bargain.
The lawyers then sent a letter to each of their clients outlining the basic
elements of the agreement, omitting the fact that they had been paid the
$225,000.
"Without the confidentiality, we
would not have had a resolution," Hager testified. "We wanted to
answer that question. We were obligated not to answer that question."
Hager also testified that while negotiating the deal, he informed Littlewood of
the agreement's basic terms, and that she was not satisfied with
Warner-Lambert's concessions.
The next day, she withdrew from the class
and requested the list of 90 names. Hager refused but offered to pay her
for the time she had invested in creating a web-site for the case.
Debra Duke, a friend of Littlewood's and
one of the potential plaintiffs, says that when Hager offered so readily to pay
Littlewood, she began to think something was wrong.
Duke confronted Hager and Trafficonte
with her concerns, but they would not reveal anything about their fees. In
December 1997, she filed complaints against both lawyers with their respective
bar associations.
"In the beginning," Duke says,
"Hager said he thought this could be the suit of the century."
But as the case progressed, Duke believes,
the attorneys found the hurdles too high.
"My belief is that John and Mark did
not have the resources to fight that kind of a battle," says Duke.
"When John was approached by Warner-Lambert, I think they set aside our
needs to make some money off the company."
Senior Assistant Bar Counsel Herman stated
at the hearing that the agreement Hager and Trafficonte signed with
Warner-Lambert was not just a settlement, but "a secret deal" with
tragic results.
"The client lost trust in her
attorney. Lost trust in the system. And lost momentum to go forward,"
Herman said.
But even if that is true, it is not clear
whether the lawyers' deal violated any rules.
Hager is charged with three violations of
the ethics rules that rely on the definition of "settlement": Rule 1.2
(a), failing to abide by his clients' decisions concerning the settlement of a
matter; Rule 1.4 (c), failing to inform his clients of an offer of settlement;
and Rule 5.6, participating in offering or making an agreement in which a
restriction on his right to practice was part of the settlement of a controversy
between parties.
If a settlement is defined simply as an
agreement that ceases hostilities before the end of litigation, Hager's conduct
may have violated the rules.
But Foster, Hager's lawyer, offered a
narrower definition of the term. "Normally, a settlement is a contract or
an agreement between a plaintiff and the defendant. There is no agreement
between the plaintiff and the defendant here," he says. Rather, the
settlement involved only Hager, his co-counsel, and Warner-Lambert.
Bar counsel also accuses Hager of crafting
the deal without his clients' consent or consultation, and of disregarding their
right to know about the fees he received. The petition also asserts that his
silence on the fee matter amounted to dishonesty.
Foster maintains that the contingent fee
agreement rebuts any charge that the attorneys received compensation from a
third party without their clients' consent.
But bar authorities are not the only ones
skeptical of Hager's defense.
"The argument that this wasn't a
settlement is certainly novel," says Joseph Mayer, president and general
counsel of the Copper & Brass Fabricators' Council, Inc.
Mayer, who formerly served as assistant
bar counsel and executive attorney for the Board on Professional Responsibility,
also notes, "You can put anything you want in a contingency fee agreement.
That doesn't mean it passes muster."
And advocates of legal reform say what
happened in the NIX case is yet another example of the problems endemic in the
legal arena.
"Just because you don't want to go
forward with the case if you don't have enough people, it doesn't mean you can
go sell the case," says James C. Turner, executive director of HALT-An
Organization of Americans for Legal Reform.
"The overriding ethical principle is
that you owe your loyalty to your clients."
Final disposition of Hager's case is not
expected for several months.
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