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Attorneys who represent owners of defective automobiles trumpet their “no-cost-to-the-client” services, but one of America’s busiest lemon lawyers triggered ethics charges when he appeared to renege on the promise. Though the Disciplinary Review Board ruled on Oct. 30 that Robert Silverman’s fee deal was ethical, the case against him has required niche practitioners to think about how they relate to their clients and the auto companies they sue when it comes to fees. The DRB cleared Silverman of conflict of interest in a case about a defective Dodge Neon, rejecting the District IV Ethics Committee’s finding of an unethical fee-setting process between the carmaker and Silverman’s firm, Kimmel & Silverman of Ardley, Pa., and Haddonfield, N.J. The client, Linda Wagoner of Wayne, didn’t like the half-fee/half-recovery split of the $4,000 settlement Silverman and Chrysler arranged, and she filed an ethics grievance. Silverman sued her for breach of contract. The district ethics panel agreed with Wagoner and recommended that the state Supreme Court suspend Silverman for 60 days. If the DRB had adopted the finding and agreed the fee deal was unethical, many lemon law attorneys would have had to examine their advertisements and client agreements to clarify the “no-cost-to-you” promises. But the panel ruled unanimously that Silverman’s lemon law arrangement with Chrysler was similar to contingency deals that are permissible. “It is not unusual for attorneys to have an interest in their client’s recovery,” the DRB said. It also was OK that Chrysler, not the client after the recovery, paid the fee. The DRB did, however, reprimand Silverman for starting a frivolous collection case against the client to resolve the fee dispute rather than initiating fee arbitration as required by New Jersey court rules. Even though the fee arrangements passed muster, Silverman says the case has prompted his firm to change its retention agreement with clients to make clear that under rare circumstances a client might, indeed, be billed for services. “We learned a valuable lesson,” Silverman says. FIRST NAME IN LEMON LAW Kimmel & Silverman says on its Web site, www.lemonlaw.com, that it has handled 24,000 cases over the years and it is the busiest practitioner in the field in New Jersey, Pennsylvania and Delaware, even by its competitors’ estimates. It also is one of the guiding forces behind a network, Lemon Law America, which reaches the public through the firm’s site. The firm touts “100 percent cost-free lemon law help” because the fees are paid by automakers under state lemon laws and consumer fraud statutes and the U.S. Magnuson-Moss Warranty Act. Under those laws, automakers are liable for the damages owners suffer when they can’t or won’t make the car run, as it should under warranty, plus legal fees. If a case goes to trial and the plaintiff wins, the court sets the fee. But most cases settle. Car company representatives and the plaintiffs’ firms decide how much will be paid for recoveries and legal fees without much discussion about how much work the firms did on the case. Trials are so rare that Silverman says he cannot remember the last time he went to court against General Motors. Chrysler is more willing to litigate, he says, though it was a settlement with Chrysler that started the ethics furor. Wagoner turned to Kimmel & Silverman in early 2001 for help with her 1998 Neon after browsing through the Lemon Law Web site, and the firm agreed to take her case. She backed the claim with repair records that suggested the car had an oil leak the Chrysler dealer refused to address. Chrysler has said there was nothing wrong with the car. The firm confirmed the representation, saying the manufacturer would pay the fee if the claim succeeded, and no fee would be due if there was no recovery. In May, the firm called Wagoner with good news. Chrysler had offered to settle for $4,000, half for her and half for the firm. Wagoner said yes on the phone, but when the firm sent her a release she refused to sign. “I feel $2,000 towards legal fees that I have no idea how much work was done on this is a bit excessive and am open to negotiations of such,” she wrote to the firm. She said in a telephone interview that she probably would have accepted if she received $3,000 of the $4,000. The firm took the position it was a fair deal because it provided for a repair at little or no cost, plus $2,000. And it said Wagoner’s acceptance on the telephone had led it to lock in the deal with Chrysler. She ended the representation and filed a grievance. Meanwhile, the firm sued Wagoner in Pennsylvania state court, accusing her of breaching the agreement with the firm, depriving it of fees expended on her behalf, which the firm calculated at $6,000. The district ethics committee and investigators from the Office of Attorney Ethics were interested in whether Silverman’s dealings with Chrysler violated conflict of interest and fee rules. He didn’t help his cause during the investigation. In an Aug. 1 letter, he told the committee, “Please note that we have now been dealing with Chrysler for about 10-11 years on this type of claim and we receive the very same $2,000 to settle our bill in every case at this stage in the legal process.” The $2,000 is “a separately negotiated fee and cost settlement with Chrysler,” he added. NO SET FEE The district ethics panel called the fee deal the “core of the violations.” The lawyers “clearly put themselves in a position where their interest was adverse to their client because the higher their fee, the less the client got.” The panel added, “It was not appropriate for them to decide how much of the settlement should be allocated to their fees.” In an interview, Silverman said, “Their position is if you have a set fee agreement you have to specifically disclose that to the client.” He adds: “They thought I received the same fee in every case regardless of how much work I do.” He says he was being inarticulate when he suggested he always got $2,000 from Chrysler for cases settled at the same juncture as Wagoner’s. What he meant to say was that Chrysler, having dealt with him so long, would know how much attorney time was spent on a case at a particular stage and that the fees weren’t separately negotiated. He says he and Chrysler will discuss a group of cases that are at the same stage of development, either before or after a complaint is filed. “Chrysler will say, OK, I know what Silverman did in this case and I’m going to make the following offer,” he says. “If I find that offer to be reasonable given the time I’ve put in the case, I’ll take it.” As for Chrysler, it too denies there is a pact between the company and the firm. According to records on the file in the case, a counsel for the company, Stephen Goodrich, told ethics prosecutors in 2002 that there is no agreement on fees and that settlement offers include fees, but don’t break down how much is fee and how much is recovery. That and Silverman’s insistence convinced the DRB that his fee didn’t violate ethical rules. The sole violation, filing the frivolous collection suit against the client in Pennsylvania, merited a reprimand, the panel concluded. Two other lawyers in the field who do not want to be identified say they have similar dealings with car companies and that Silverman’s mistake was pursuing Wagoner. “You occasionally get a client who declines to sign a release after agreeing to settle and you just have to let it go,” one of those lawyers says. “You lose the fee, but that’s the cost of doing business.” In an interview, Wagoner called the DRB decision “a joke.” “You can’t tell me they don’t have an agreement with Chrysler,” she says. “He’s not acting in my best interest if he gets a basic $2,000 for what he does.” She says she doesn’t regret her refusal to sign the release, even though that cost her the $2,000 she would have received. “It was the principle of the thing,” she says. Silverman, meanwhile, has changed the engagement letter sent to clients. It’s still not a contingency agreement. That isn’t required because lemon law cases are contract cases, not tort claims. The new letter explains that settlements with dealers may include lump sums not broken down between fee and recovery and that the client will be told of the split when asked to sign off on the settlement. The five-page agreement also gives a breakdown of how much each attorney and paralegal in the firm bills, to give the client an idea of how much the work performed was worth. “We don’t want any more situations like this,” Silverman says. “We send the big fat letter that says everything.”

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