NEW JERSEY LAW JOURNAL - FEBRUARY 5, 1996

WHERE ARE THE ETHICS COPS?

By Henry Gottlieb

Personal injury superstar James Carney admitted that he diverted $1 million in client funds to himself, and the Office of Attorney Ethics is investigating. As more allegations surface, opponents like Glenn Bergenfield, wonder why Carney is still practicing law. Carney's lawyer Gerald Krovatin says there should be no rush to judgment.

Remember how crazed the State Bar Association was in 1994 when it complained that the Supreme Court's new, muscular, discipline bureaucracy would throttle innocent lawyers?

Now there is a case that suggests that the watchdogs are the real innocents and that the Office of Attorney Ethics has been gulled by a skillful, unethical litigation, Roseland solo James Carney.

Carney's long list of million-dollar verdicts makes him a personal injury superstar, but his sad record of transgressions, his trail of wronged clients and a half-dozen malpractice suits against him have prompted a simple query from his adversaries: Why is he still in business?

Carney admitted to the Disciplinary Review Board in November that he withheld more than $1 million from client's personal injury awards, and he agreed to accept a three-month suspension. But since then, a search of court records by the Law Journal has turned up two more suits that say Carney took funds. Three additional malpractice complaints have also come to light.

Worst of all for Carney, the DRB has rejected the three-month suspension proposal and the stipulation. That has sent the case back to the Office of Attorney Ethics for further investigation, and further work in what seems to be a new niche market: suing and defending James Carney.

On one side are opponents who wonder why he still has a law license. "I'm surprised he is still practicing law," sad Robert Walker, a solo practitioner from Herndon, Va., who represents a Texas company that has been prosecuting a malpractice complaint against Carney for almost six years. Ironically, Walker says, keeping Carney in practice may be the only way his pursuers can recover what they say he owes.

On the other side are lawyers who say that although Carney won't comment, he has done nothing wrong but rather welcomes a chance to clear his name and show in court that his opponents are wrong.

"These lawyers may want to rush to judgment, but Jim Carney is entitled to a full hearing and to tell his side of the story," says a lawyer he brought in to defend him against pending ethics cases, Gerald Krovatin, of Chatham's Arseneault & Krovatin.

Acting as his own attorney last November, Carney made what looked like a savvy bargain for himself with the ethics prosecutors. They would recommend a three-month suspension of Carney would stipulate that he deducted fees worth $270,000, $118,000 and $704,000 from three contingency clients' award checks, without seeking the requisite fee-enhancement approval from the courts.

Thomas McCormick, the OAE prosecutor who presented the package to the Disciplinary Review Board on Nov. 5, justified the recommended punishment by saying that the three violations did not constitute the offenses of misappropriation of client funds, which would mean disbarment.

These were explainable transfers of sums that Carney probably would have deserved anyway, if only he had made the request properly, McCormick said. Not to be overlooked, McCormick added, was the masterful work that Carney performed to win the glittering verdicts and settlements that generated such large sums. [For an account of the hearing, see the Nov. 20, 1995 Law Journal.]

The DRB didn't buy it, and neither have the lawyers who have come out of the woodwork to talk about additional complaints against Carney.

For starters, the discipline board, whose chairman, Lee Hymerling, had expressed skepticism about the prosecutor's' three-month deal, rejected the proposed punishment and stipulation, and remanded the case for further investigation.

Krovatin says that there were errors in the stipulation, that Carney realizes now he shouldn't have signed it and that he welcomes the chance to mount a full defense.

It also puts Carney in jeopardy of a far stiffer penalty than a three-month suspension, and the additional malpractice allegations jeopardize his reputation as a top-notch litigator.

Our complaint alleges that in Essex County in 1991 he cost a client $3 million for failing to file a complaint on time.

Another complaint charges that in 1988 he and an associate mismanaged 21 collection matters for a Texas transportation company, costing the client #275,000 in lost recoveries.

Yet another complaint alleges that in 1995 he not only failed to tell a client about a settlement offer that would have raised the client's recovery by $1 million, he tired to shortchange his tow co-counsel on their share of the fee. The latter part of that allegation already has been adjudicated.

On Jan. 5, Essex County superior Court Judge Julio Fuentes found Carney in contempt for withholding $16,000 from the co-counsel and, perhaps most mind-boggling, for doing to yet another client what he admitted during the DRB hearing to doing to three others: taking more our of a settlement check than he was entitled to.

WHY IS HE STILL IN PRACTICE?

All this---the DRB's concerns and the allegations by other clients---should make the disciplinarians wonder why they are letting Carney continue to practice law, according to a lawyer for a disgruntled former Carney client.

"Are you comfortable that Carney is not, perhaps as you are reading this letter, wrongfully taking money from other clients who may not discover the taking for years?" Princeton solo practitioner Glenn Bergenfield wrote to OAE prosecutor McCormick last Monday. "How many thefts before you conclude that this man cannot be trusted with his client's money?

McCormick was out of the office last week, in Baltimore for a conference of ethics prosecutors.

OAE Director David Johnson disagrees with the suggestion that McCormick and the agency are not being diligent. In terms of speed, he says, the inquiry was still within the six-month guidelines the Supreme Court has established for such investigations.

As for the notion that more drastic immediate actions should be taken, Johnson says the OAE is not as matter of policy swayed by the opinions of private lawyers seeking advantage in litigation with someone who might be an OAE target.

Nor is it the agency's job to anticipate the possibility that someone will commit a criminal act, Johnson says.

"We will continue to exercise our best judgment, in the public interest," Johnson says.

Carney's lawyer dismisses these musings about his client's fitness to practice law as the self-interested ravings of adversaries. Keep in mind, says Krovatin, "these are comments by adversaries in professional malpractice cases against him."

EXCEPTIONAL TRIAL LAWYER

None of this would be happening if Carney were a run-of-the-mill practitioner, or even a lawyer with an occasional big verdict or famous client. By all accounts he is an exceptional trial lawyer, and he has more than two dozen verdicts and settlements in the $1 million-plus category to prove it, including the biggest verdict of the year in New Jersey in 1994, $8.96 million.

"He's one of the few lawyers I know, who strikes terror in the hearts of insurance companies," says a lawyer and former fan of Carney's who does not want to be identified.

Some lawyers attribute his skill to fearlessness---the kind of fearlessness expected in a combat infantry officer, which Carney was in Vietnam.

"He's a fighter; he doesn't quit," says his lawyer Krovatin, who attributes some of Carney's problems to the exigencies of personal injury practice. Carney wins big settlements for his clients and gets permission form them to use fees to pursue other litigation, Krovatin says. And sometimes, he adds, when those further suits don't pan out, the clients obtain other lawyers who come after Carney.

Even his opponents salute Carney's courtroom skills.

"Carney gets results," says Thomas Raimondi, of Wayne's Afflitto, Raimondi and Afflitto, who is one of the lawyers now in the get-Carney business.

Raimondi's client is Delores Patterson, a Glen Allen, Va., woman who was seriously injured when a car in which she was a passenger collided with a moving van in Newark in 1987.

In 1994, Carney took her case to trial before Judge Fuentes and won a jury verdict of $3.2 million after presenting evidence of debilitating injuries caused by the negligence of the drivers. With interest, the judgment came to $4.3 million.

The insurance carrier for the moving van won a new trial, however, after convincing the Appellate Division that the jury may have been rushed by Judge Fuentes' attempts to keep the jury intact when a juror asked to be excused for personal reasons during the deliberations.

In October 1995, rather than retry the case, both sides agreed to a $2.2 million settlement.

CLIENT IN DARK ABOUT OFFER TO SETTLE

So why is Patterson suing Carney? Because, according to her pleadings, she learned in November that eight months earlier, while the appeal was pending, the jittery carrier had offered to settle the case for $3.2 million---the verdict minus interest---and that Carney even conveyed the offer to her or to his co-counsel: he just turned it down. The offer came to light when a co-counsel stumbled on it in one of Carney's files.

According to a letter submitted in the malpractice case, the carrier had offered to pay $2 million on an annuity that would have made the total guaranteed payout $5.72 million.

"Clearly, if this offer had been presented and accepted I would have received one million more dollars than the ultimate settlement and the structured part of the settlement would have produced the sum of $7,000 per month tax free," Patterson said in a certification.

Patterson said that throughout the discussions in 1995, Carney urged her and her husband to put any settlement funds they received in a trust fund that would be managed by Carney's wife, a broker with Merrill Lynch.

"When my husband hesitated in agreeing to Mr. Carney's suggestions, Mr. Carney became incensed and stated, you owe it to me.

These statements have a familiar ring. Carney was reprimanded by the state Supreme Court in 1994 for failing to release funds to a client until the client agreed to invest them with a broker of his choice, and only later did the client find out the broker was Carney's wife.

Judge Fuentes has already found that after the Patterson settlement, Carney withheld money from Patterson and his co-counsel, Barbara Comerford and Elliot Doliner, of Midland Park's Comerford & Doliner.

After the $2.2 million settlement was approved, Fuentes signed an order approving an award of counsel fees equal to about one-third of the recovery, as permitted by the rules. But when Carney disbursed the money from the settlement, he unilaterally withheld $16,000 from the co-counsel and $35,000 from Patterson, Fuentes found.

Carney didn't show up for the Jan. 5 hearing about all this. He was on a trip to Europe, according to the lawyer who represented him, Robert Vort, a solo practitioner in Hackensack.

Vort told Fuentes that Carney felt the judge's original disbursement order was incorrect and that he was entitled to the money, but Judge Fuentes, like the DRB in the previous case didn't buy it.

After agreeing to the disbursement order, Fuentes said, "Mr. Carney could not then go back to his office and say. 'Well, wait a minute, I am entitled to more money, and I think I will just cut a different check, or deduct different amounts.'"

Vort said Friday that an order is being prepared that requires Carney to repay the money and that Carney will repaid it: all $51,000, plus $7,000 in counsel fees to Doliner and to Doliner's lawyer, Seton Hall Law School professor Mark Denbeaux.

Vort says he hasn't grilled his client about the malpractice allegation. But he says that based on brief conversations with Carney, it is his understanding that Carney didn't tell Patterson about the $3.2 million offer because he had no authority to settle the case for that figure. Vort says he thinks the settlement authority was about $3.5 million or more.

Asked why Carney didn't bother telling her about the offer, anyway, Vort says that he planned to, but the carrier took the offer off the table within a week so it became moot.

STATUTE OF LIMITATIONS ERROR

In another malpractice case against him---brought by Princeton lawyer Bergenfield who thinks the regulators should pull the plug on Carney---Carney allegedly made the kind of error that master litigators don't make: blow a statute of limitations.

The plaintiff, Donna Berger of Bricktown, hired Carney in 1987 to bring a malpractice action against physicians whose alleged misdiagnosis of a tumor in her back led to permanent injuries. In October 1991, the cases against three doctors settled for $775,000. But according to the case against Carney, he let the statue of limitations pass without naming the estate of another doctor and an orthopedic practice group.

An appeal to override the statute of limitations was denied, and Berger claims she lost up to $3 million that could have been recovered if the doctor had been in the case.

The complaint also says Carney didn't tell Berger until 1994 that the complaint had been dismissed. Worse, he allegedly retained $34,000 from the settlements to pursue the claim against the doctor, knowing the claim already had been dismissed. Bergenfield contends that Carney took $55,000 more from Berger than he deserved, but right now Bergenfield's secondary target is the OAE, which he says is moving too slowly against Carney.

In his letter to OAE prosecutor McCormick last week, Bergenfield expressed concern that there won't be anything left for all the people seeking money from Carney if the ethics system doesn't step in.

"I think you need to act immediately to make certain that Carney is prevented from taking anyone's money," Bergenfield wrote. "He may not have the money to pay all his clients back, once you get around to ordering him to do so."

QUESTIONS OF RECOVERY

Fear of no recoveries is a constant in all three of the newly disclosed malpractice complaints against Careny. Patterson's lawyers say they have received notice that Carney is covered by Association of Trial Lawyers Assurance, of Chicago, but they have asked Fuentes to freeze Carney's account anyway---a request Fuentes has denied.

A lawyer in another malpractice case against Carney is concerned that a settlement reached after almost six years of litigation will be disturbed by the other cases swirling around Carney.

Since 1989, Herndon, Va., lawyer Robert Walker has been trying to collect $275,000 that Careny allegedly cost Walker's client, Delta Traffic Services Inc., of Dallas, Texas, a collection agency for transportation companies owed sums by shippers.

Walker says Carney and a former associate were hired by Delta to act as New Jersey counsel in 21 relatively easy matters in New Jersey, but that the cases were neglected and the statute of limitations expired before many of the collection claims were filed. The loss was $177,000 in bills and another $90,000 or so in prejudgment interest, Orr says.

Walker says his collection efforts were thwarted by the slow pace of litigation in federal court and denial of coverage by Carney's insurance carrier. In addition, much of the delay was caused by Carney's stalling tactics, he says.

But Walker says that he finally checked out a confidential settlement with Carney. Walker said last week that the settlement has been prepared and is ready to be signed.

To represent him in this case, Careny turned to yet another lawyer, Harvey Weissbard, of Weissbard & Wiewiorka in West Orange. Weissbard says that Carney's problem was not malpractice but inattention to the work of an association in what was his former firm, Carney and Wilson, of Newark.

At the time, the firm was preoccupied with internal disagreements that eventually caused its breakup. Former partner Edward Wilson and former associate Thomas Harley declined to comment.

Walker, in the meantime, is holding his breath until the settlement is made final. He says he wonders why Carney is still practicing law, but he adds that it's not in his interest to have Carney put out of business.

"If he's not practicing law, where is he going to get money to pay the settlement?"