Florida Bar counsel Joi Pearsall and defense attorney David Rothman. Courtesy photos

The Florida Supreme Court has heard arguments for and against disbarment of Fort Lauderdale attorney Peter G. Herman, accused of concealing a $2.7 million bonus during bankruptcy. But it wasn't a typical attorney-discipline case.

Herman's alleged misconduct doesn't stem from actions he took as a lawyer representing a client, but from actions he made while a litigant in a personal Chapter 7 bankruptcy case in 2012.

Florida justices have to decide whether Herman, then a director at Tripp Scott, was untruthful when he filled in his bankruptcy paperwork. And if so, whether that amounts to a violation of the ethics rules that govern attorneys.

Herman served as co-lead counsel on two large lawsuits at the time, both of which resulted in million-dollar awards, subject to contingency fee arrangements. In all, Tripp Scott collected $10 million in legal fees.

But that money hadn't yet been distributed among attorneys at the time of Herman's bankruptcy filing, so when it came time to declare what he expected to make in bonuses that year, Herman referred to what he usually received in bonuses—between $65,000 and $70,000. He claims to have done that on the advice of his lawyer Bart Houston.

But Florida Bar counsel Joi L. Pearsall in Sunrise asked the court to disbar Herman, arguing that failing to mention an anticipated increase in pay showed a lack of candor and honesty demanded by his profession.

"The respondent sought to obtain a discharge in bankruptcy and walk away a millionaire," Pearsall said.

But the panel took issue with the fact that, in this scenario, Herman was a client, not a lawyer. Justice Barbara Lagoa pointed to Florida Bar Rule 4-3.3(a)(1), which court-appointed referee West Palm Beach Circuit Judge August Bonavita found Herman was guilty of breaking. That rule governs false statements of fact to a law tribunal, but Lagoa pointed out it applies to lawyers representing clients, not attorneys as litigants.

Defense counsel David Rothman of Rothman & Associates in Miami argued that considering advice of counsel is crucial in this case, as Herman was nothing more than a client.

"It's without hyperbole that I say that Mr. Herman's discipline case is factually rare, if not unique. Bankruptcy law is a hyper-technical, almost obscure practice area. Even experienced lawyers don't know about bankruptcy, unless they've been involved in bankruptcy," Rothman said. "And when you are inexperienced as to the law, what do you do? You hire a lawyer."

Lagoa gave credence to Herman's advice-of-counsel defense, acknowledging that bankruptcy is a highly specialized area of law.

But a bankruptcy judge in 2013 found Herman's actions amounted to an intentionally misleading statement.

And now, Justice Carlos Muniz raised questions about the referee's report. He found its "authority seems to be suspect," because the report relied heavily on a discipline case that included an advice-of-counsel defense, but became precedent in a different context.

"I'm worried that this thing that's been called a precedent, and that seems to have been a pretty significant part of the referee's reasoning, isn't really something that our court actually held," Muniz said.

Lagoa noted that Herman was an at-will equity employee, not a partner, and therefore had no written contract outlining compensation, so couldn't have definitively known what he'd get, if anything.

"Frankly, at the end of the day, it was by the grace of the compensation committee as to whether he was going to get anything, a dime, 5 cents, $50,000, $100,000 or $2 million," Lagoa said.

Chief Justice Charles Canady agreed, remarking that although "it's clear that Mr. Herman was hoping he was going to get a lot of money," he found it hard to square that he had a vested interest in a certain amount.

But bar counsel Pearsall pointed to emails between Herman, Tripp Scott president Edward Pozzuoli and other members of the firm's compensation committee, which discussed how bonuses from the $10 million fee might be distributed. According to the referee's findings, Herman had expressed disappointment that he and others who helped win the case were kept "out of the loop" about payment.

"The emails say that it was going to be a win-win situation for all," Pearsall said. "He [Herman] knew he was going to receive a substantial amount of money."

Rothman told the panel his client didn't want to discuss sanctions, as he believes he's innocent.

The court is yet to rule.

 

More discipline cases:

Florida Lawyers Spar Over Fate of Judge Watson's Attorney, Who Faces Disbarment

Disbarment Recommended for Lawyer Stephen Rakusin Over 'Baseless' Lawsuit