Disciplinary Counsel v. Smith

The Reigers, New York residents, survived a terrible auto accident in Ohio. The Reigers contacted the Chapman Law Firm, an Ohio personal injury firm owned by Frank Chapman, which assigned associate Justin Smith (defendant) to the matter. Smith and the Reigers signed a contract providing that the Reigers would pay fees equal to 33.3 percent of the gross amount of a settlement obtained if Smith did not file suit and 40 percent if Smith did file suit. The insurance of Marvin Seltzer, the driver at fault, would not cover the Reigers’ damages. Therefore, Smith looked to the Reigers’ personal-injury protection (PIP) for recovery. Smith was vaguely aware that under New York law, PIP was no-fault insurance designed to streamline recovery for insured parties, but he was not aware that the law forbade attorneys from collecting contingency fees from PIP payments, nor did he research the issue. Smith asked Chapman whether they could collect fees on the PIP payout, and Chapman said that they could, instructing Smith to charge the fees. Smith filed suit against Seltzer’s insurance policy only and filed PIP claims on behalf of the Reigers. Smith later collected about $83,260.00, or 40 percent of the gross settlement amount, in attorney’s fees on the PIP coverage. The Reigers filed and settled a suit against Chapman and the firm, and then someone filed a complaint with the Office of Disciplinary Counsel (the board) (plaintiff), which held a hearing on the matter. Smith conceded that the fees were excessive but argued that because he acted under Chapman’s supervision, Chapman was responsible. The board found that Smith violated the rule that prohibited excessive fees and taking on representation for which he was not competent. The board recommended that the court publicly reprimand Smith, who then filed an objection to the board’s findings, arguing that the court should dismiss the complaint.