February 7, 2018

Affiliation with Lawyer Referral Service Warrants Discipline; In re Mossler

Category: Indiana Law Review | Author: | Share:

The business of law can be difficult, and attorneys can try many things to earn a living. But we need to be very careful when entering into relationships with referral services, because they can easily violate the Rules of Professional Conduct.

Mossler operated a consumer debt resolution practice since 2008. During that time, he was affiliated with Lexxiom, Inc., a corporation headquartered in California. Lexxiom performed marketing services for Mossler. When a potential client called, nonlawyer Lexxiom staff would interview the potential client and forward the information to Mossler. He would then accept or reject the client.

Mossler’s standard engagement contract limited his services to non-litigation services and litigation consulting in exchange for an initial flat fee (usually 8-10% of the debt being resolved), plus monthly fees. Clients could also engage Mossler separately to perform litigation services. Once a client signed an engagement contract with Mossler, Lexxiom notify creditors of Respondent’s representation and would undertake communication to negotiate settlements with the creditors. Mossler paid a monthly retainer to out-of-state attorneys to perform services for Mossler’s clients who were not domiciled in Indiana.

As part of his relationship with Lexxiom, Mossler opened a trust account in California. Mossler was not a signatory on this account, and he failed to certify it with the Clerk of the Indiana Supreme Court. The only two signatories on the account were two Lexxiom nonlawyers. The clients authorized Lexxiom to withdraw agreed attorney fees from their funds held in trust and also to withdraw settlement accumulation fees once sufficient savings had accumulated to negotiate debts. Lexxiom made withdrawals and deposits on a “batch” basis—lumping transactions for multiple clients into a single transaction—because of the high volume of daily transactions.

But Lexxiom’s personnel made errors, and Mossler’s trust account was overdrawn on three separate occasions in December 2015. Mossler eventually was alerted to this and engaged an independent accounting firm to reconcile the balance and replenished the funds that mistakenly had been withdrawn from the trust account by Lexxiom.

Disciplinary proceedings began, and Mossler stipulated the violation of a number of Rules of Professional Conduct, including inadequately overseeing Lexxiom’s conduct, trust account violations, and improper fee-splitting. And while the Court did not say so, it is difficult to see how any lawyer affiliated with Lexxiom could comply with the Rules of Professional Conduct, given its structure. The agreed discipline was a six-month suspension without automatic reinstatement.

Lessons:

Before affiliating with any marketing company, check that the business model does not conflict with your obligations under the ethical rules.