Trolling For Clients?
By: Miles Pringle
Recently the Texas Bankers Association (“TBA”) and the Independent Bankers Association of Texas (“IBAT”) filed a lawsuit against a Pennsylvania law firm for allegedly “soliciting” banks in Texas (Tarrant County, Texas, Case No. 096-290154-17). The law firm in question sent letters to Texas banks claiming to represent visually impaired individuals, and alleged that the banks’ websites violate the Americans with Disabilities Act (“ADA”). The form demand letter requests that the parties engage in negotiations to obtain an agreement “providing for injunctive relief and reasonable attorney’s fees and costs.”[i]
This may sound familiar. The law firm, Carlson Lynch Sweet Kipela & Capenter LLP (located in Pittsburgh, Pennsylvania (“Carlson Lynch”)), has been identified for these lawsuits in many publications, including by Sara Randazzo of the Wall Street Journal.[ii] As of November 2016, Randazzo reports that Carlson Lynch has filed “about 40 nearly identical cases [which] have landed in front of the same federal judge”. Randazzo further reports that “Defense lawyers and industry groups counter that while the underlying issues are important, the suits are a legal-fee shakedown and don’t help improve accessibility.”
The TBA and IBAT have latched onto the terms included the proposed settlement agreement sent by Carlson Lynch, which provide that the law firm itself will “assist” the bank for two (2) years after the execution of the agreement, including “threatened lawsuits or threatened investigations, or actual lawsuits or investigations from any parties”.[iii] The settlement agreement continues that the parties “agree that this obligation on Carlson Lynch is a material term of this Agreement and a primary consideration for BANK entering into the Agreement.” Also, the bank agrees to pay “certain attorneys’ fees and expenses in the amount and in accordance with the terms memorialized in a separate, confidential letter agreement”.
Is the letter containing the terms of attorneys’ payment an engagement letter? It would be informative to obtain copies of those letters from other companies Carlson Lynch has sued. It not apparent from the filing if TBA or IBAT has any copies, or if they will be able to obtain a form copy in discovery, which may be privileged (e.g. attorney-client communication). Regardless, it appears to be unethical for a law firm to make its own services “material” to any settlement, where a simple indemnification provision would suffice. The American Bar Association (“ABA”) Model Rules of Professional Conduct preclude attorneys from making solicitations when “the solicitation involves coercion, duress or harassment.”[iv] Offering one’s services ‘or else’, would appear to be violating the Model Rules.
Also, the terms of the settlement agreement may run afoul of conflict of interest rules. A client should be able to settle his or her claim without their attorney’s future business being a sticking point. ABA Model Rules provide that a “lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients… unless each client gives informed consent, in a writing signed by the client.”[v] More importantly, Rule 1.8(i) provides that a “lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation the lawyer is conducting for a client”.[vi] Comments to the Model Rules explain that the rules relating to the attorney’s pecuniary interests are “designed to avoid giving the lawyer too great an interest in the representation. In addition, when the lawyer acquires an ownership interest in the subject of the representation, it will be more difficult for a client to discharge the lawyer if the client so desires.”[vii]If Carlson Lynch is contracting for future legal services, and not payment of the client’s accumulated attorneys’ fees to date; then Carlson Lynch’s pecuniary interests are in conflict with its client’s.
Carlson Lynch attorneys have stated that website inaccessibility “is an epidemic in this country”.[viii] That may be true, however, “Currently, no specific ADA website standards exist, and the U.S. Department of Justice (DOJ) has now delayed issuing regulations on website accessibility until 2018.”[ix] In the meantime the ADA lawsuits are typically quickly settled for between $10,000 and $75,000.[x]
IBAT and TBA have taken a more aggressive approach by suing Carlson Lynch, as opposed to simply filing a bar complaint, which they have also done. The Petition seeks injunctive relief as well damages under Texas’ “Civil Liability for Prohibited Barratry”[xi], which carries the potential of $10,000 fine, actual damages, and, paradoxically, attorneys’ fees. Carlson Lynch may wish to quickly settle to avoid accumulating these attorneys’ fees.
[i] See Exhibit 1 to the Petition.
[ii] Randazzo, Sara, “Companies Face Lawsuits Over Website Accessibility For Blind Users”, The Wall Street Journal, Updated Nov. 1, 2016 (available at https://www.wsj.com/articles/companies-face-lawsuits-over-website-accessibility-for-blind-users-1478005201).
[iii] Exhibit 1 to the Petition.
[iv] ABA Model Rule No. 7.3(b)(2); see also Comment No. 1 (“A solicitation is a targeted communication initiated by the lawyer that is directed to a specific person and that offers to provide, or can reasonably be understood as offering to provide, legal services.”).
[v] ABA Model Rule No. 1.8(g).
[vi] ABA Model Rule No. 1.8(i).
[vii] Comment No. 16 to ABA Model Rule No. 1.8.
[viii] Neil, Martha, “Law firm targets real estate companies for ADA suits over inaccessible websites”, ABA Journal, Posted May 12, 2016 (available at http://www.abajournal.com/news/article/law_firm_sues_real_estate_companies_over_claimed_epidemic_of_non_ada_compli/).
[ix] Knisely, J. Colin (Duane Morris LLP), “Banks the Latest Targets in Website Accessibility Claims”, LEXOLOGY, Published Aug. 19, 2016 (available at http://www.lexology.com/library/detail.aspx?g=37208a6c-de2d-4d50-af15-54fe1848a83e).
[x] Randazzo, see Endnote No. ii, infra.
[xi] Tex. Gov't Code § 82.0651.
This Article was originally published in Oklahoma County Bar Association’s Briefcase Vol. 50 No. 2 in February 2017.