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ATTORNEY disciplinary
proceeding. Attorney
publicly reprimanded.
¶1 PER CURIAM. We review the report
and recommendation of the referee, Richard
M. Esenberg, that Attorney James J. Gende II
receive a public reprimand and make
restitution to his former employer, Cannon &
Dunphy, S.C. Because no appeal has been
filed, we review the referee's report and
recommendation pursuant to SCR 22.17(2). We
approve and adopt the referee's findings of
fact and conclusions of law. We agree that
Attorney Gende's professional misconduct
warrants a public reprimand, and we find it
appropriate to order him to make restitution
to Cannon & Dunphy in the amount of
$20,221.76. We also deem it appropriate to
require Attorney Gende to pay the full costs
of the proceeding, which are $28,478.26 as
of June 4, 2012.
¶2 Attorney Gende was admitted to
practice law in Wisconsin in 2000. He has
no prior disciplinary history. In September
of 2000 he joined the law firm of Cannon &
Dunphy, a Brookfield firm concentrating its
practice in the areas of personal injury,
product liability, and medical malpractice.
¶3 Upon joining Cannon & Dunphy,
Attorney Gende executed the firm's standard
employment agreement which provided, among
other things, that if Attorney Gende were to
leave the firm and if any of Cannon & Dunphy
clients chose to go with him, any fee
generated would be paid to Cannon & Dunphy,
less a sum representing the number of hours
that Attorney Gende worked on the client's
case after his departure, multiplied by his
base salary at Cannon & Dunphy, divided by
2,080. The employment agreement also
provided that Attorney Gende was to
immediately pay Cannon & Dunphy all
outstanding costs that had been advanced on
behalf of any client who chose to be
represented by him.
¶4 Between September 2000 and April
2004, Attorney Gende represented over 90
clients in the course of his employment at
Cannon & Dunphy. Each of those clients
signed a standard retainer contract which
provided that if the client changed
attorneys prior to resolution of their
claim, Cannon & Dunphy would have a lien on
any recovery. The retainer contracts
provided they would not be effective until
they were counter-signed by a Cannon &
Dunphy representative. In all but two of
the cases handled by Attorney Gende, the
retainer contracts were counter-signed, in
each case by Attorney Gende himself. The
two retainer contracts that were not counter-
signed involved Ken K. and Roger W. Both of
those cases were pending in state court in
Illinois, where Attorney Gende was also
licensed to practice.
¶5 Attorney Gende decided to leave
Cannon & Dunphy and start his own practice
in the spring of 2004. Upon informing
Cannon & Dunphy of his intent to leave,
Attorney Gende and the law firm negotiated a
separation agreement. The agreement
provided for a new formula for sharing fees
between Attorney Gende and the firm for
those clients who decided to leave the firm
and retain Attorney Gende. The separation
agreement provided that 80 percent of any
fee generated by the departing client would
be paid to Cannon & Dunphy and 20 percent
would be retained by Attorney Gende. There
was one exception. In the case of Roger W.,
the separation agreement provided the split
would be 75/25 percent in favor of Cannon &
Dunphy.
¶6 Attorney Gende left Cannon & Dunphy
on April 16, 2004. Clients were informed of
his departure by a letter from the law firm,
the text of which had been agreed to as part
of the separation agreement. The letter
informed clients of Cannon & Dunphy's
interest in the proceeds of any settlement
and of their options to stay with the firm,
go with Attorney Gende, or move to a third
lawyer. The letter did not inform clients
of the cost-sharing formula set forth in the
separation agreement.
¶7 Sixteen clients chose to leave
Cannon & Dunphy and have Attorney Gende
represent them. Attorney Gende settled six
of those cases within approximately ten
weeks of his departure from the firm. A
dispute arose almost immediately regarding
the payment of fees to Cannon & Dunphy. By
late May 2004, both Attorney Gende and
Cannon & Dunphy had hired counsel to
represent them in the dispute. Over the
course of the next several years, Attorney
Gende and Cannon & Dunphy litigated the
issue of fees and costs in a number of the
cases. In none of the cases did a court
ever conclude that Cannon & Dunphy was not
entitled to the fees it claimed. However,
in no case was Attorney Gende sanctioned nor
was his litigation position ever found to be
frivolous.
¶8 Attorney Gende filed an action
seeking a declaration that the separation
agreement was invalid. This case ultimately
resulted in an unpublished court of appeals'
decision upholding the separation
agreement. This court denied a petition for
review.
¶9 During the course of the various
lawsuits, Attorney Gende held or tried to
hold the 80 percent of the fees to which
Cannon & Dunphy asserted a claim in trust,
while paying into his business account the
20 percent that he would have been entitled
to under the separation agreement. In the
Roger W. and Ken K. cases, Attorney Gende
paid himself all of the fees generated. In
addition, while the lawsuits with Cannon &
Dunphy were ongoing, Attorney Gende
deposited various amounts for disputed fees
and costs with the clerk of the Waukesha
County circuit court. Between December 2004
and May 2005, he deposited a total of
$235,283.65 with the clerk of court. In
October 2005 the Waukesha County clerk of
court returned the bulk of those funds,
issuing a cashier's check payable to
Attorney Gende's law offices in the amount
of $213,667.86. Attorney Gende held that
check for several weeks. On or about
November 10, 2005, he gave the check to his
attorneys, who held it until April 2006 when
it was deposited in an interest-bearing
account that was apparently established for
that purpose.
¶10 Cannon & Dunphy filed a grievance
against Attorney Gende with the Office of
Lawyer Regulation (OLR) in June of 2004. In
June of 2007 Attorney Gende was appointed as
a lawyer member of the District 6
investigative committee. The investigation
of Cannon & Dunphy's grievance was completed
in November of 2007 and a preliminary report
was shared with Attorney Gende. The
investigative report was reviewed by the
director of the OLR who, in March of 2008,
chose to present it to a preliminary review
committee which found probable cause to
proceed.
¶11 On May 13, 2008, the OLR filed a
complaint alleging 18 counts of misconduct.
Attorney Gende filed a notice of motion and
motion to dismiss the OLR's complaint based
on the OLR director's discretionary decision
not to follow SCR 22.25, which provides for
allegations of misconduct against lawyer
regulation system participants to be
diverted to a special preliminary review
panel. The referee denied Attorney Gende's
motion to dismiss in December 2009.
Attorney Gende then filed a petition for
supervisory writ or, in the alternative,
petition for review of the referee's
decision. This court denied the petition on
March 16, 2010. The court found that under
the unique circumstances of this case the
OLR director was not required to divert an
investigation pending under SCR 22.03 to the
process set forth in SCR 22.25 when, three
years after the investigation began,
Attorney Gende was appointed as a lawyer
member of a district investigative committee.
¶12 In April 2011 the parties filed
cross-motions for summary judgment. The
referee granted and denied each party's
motion in part. Evidentiary hearings were
held in August and September 2011, and a
hearing on sanctions was held in November
2011. The referee issued his report and
recommendation on May 14, 2012. The referee
found that the OLR failed to meet its burden
of proof on 14 of the 18 counts of
misconduct alleged in the OLR's complaint.
He found that the OLR had met its burden of
proof as to four counts.
¶13 The referee's factual findings and
legal conclusions are voluminous. There is
no need to repeat them all here. It is
sufficient to provide the following summary
information concerning the misconduct at
issue in this matter.
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¶14 The referee found that the OLR did
not meet its burden of proving that Attorney
Gende failed to promptly notify a third
person in writing upon receiving funds or
other property in which the third person has
an interest, contrary to former SCR 20:1.15
(b) (effective through June 30, 2004)
(Counts 1 through 3); failed to, upon
request, render a full accounting regarding
such property and further failed, upon
request by a third party having an ownership
interest in the property, to promptly render
a full written accounting regarding the
property, in violation of former SCRs 20:1.15
(b) and 20:1.15(d)(2) (effective July 1,
2004, through June 30, 2007) (Counts 4 and 6
through 12); engaged in conduct involving
dishonesty, in violation of former SCR 20:8.4
(c) (effective through June 30, 2007)
(Counts 16 through 17); and communicated
about the subject of several representations
with a party Attorney Gende knew to be
represented by another lawyer in the matter,
without the consent of the other lawyer, in
violation of former SCR 20:4.2 (effective
through June 30, 2007) (Count 18).
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¶15 The referee found the OLR did meet
its burden of proof with respect to Counts 5
and 13 through 15. Count 5 alleged that by
failing to provide Cannon & Dunphy with a
full accounting, either orally or in
writing, of the personal injury settlement
in the Ken K. matter, despite Cannon &
Dunphy's ownership interest in that
settlement pursuant to its employment and
separation agreements with Attorney Gende as
well as various retainer contracts, and
despite the repeated requests for
accountings by the firm and its counsel,
Attorney Gende violated former SCRs 20:1.15
(b) and 20:1.15(d)(2).
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¶16 Count 14 alleged that by failing to
hold $12,440.77 relating to the Ken K. case
in trust, when both Attorney Gende and
Cannon & Dunphy claimed an ownership
interest in those funds that was identified
by a contract, Attorney Gende violated
former SCR 20:1.15(d)(3).
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¶17 Count 15 alleged that by failing to
hold $7,780.99 relating to the Roger W. case
in trust, when both Attorney Gende and
Cannon & Dunphy claimed an ownership
interest in those funds that was identified
by a contract, Attorney Gende violated
former SCR 20:1.15(d)(3) (effective July 1,
2004, through June 30, 2007).
¶18 The referee found that in the Roger
W. and Ken K. matters, Attorney Gende paid
himself not only the percentage to which he
was entitled under the separation agreement,
he also paid himself the percentage to which
Cannon & Dunphy was asserting a claim. The
referee found Attorney Gende's decision to
take the money in these two cases
constituted a unilateral arbitration of the
dispute which could not be justified even by
a colorable claim that the employment
agreement and separation agreement were
invalid.
¶19 The referee said while the colorable
claim argument would permit Attorney Gende
to litigate with Cannon & Dunphy, it would
not permit him to help himself to disputed
funds. The referee noted Attorney Gende's
only justification for paying himself funds
to which Cannon & Dunphy was asserting a
claim was that in the Roger W. case an
Illinois trial judge found that Cannon &
Dunphy had no lien under Illinois law. The
referee noted, however, that the Illinois
judge expressly declined to address the
validity of claims for attorney's fees and
her order did not resolve Cannon & Dunphy's
claims nor could it justify Attorney Gende
paying himself the disputed sum in Ken K.'s
case over nine months before the Illinois
judge issued her order.
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¶20 Count 13 of the OLR's complaint
alleged that Attorney Gende violated former
SCR 20:1.15(d)(3) (effective July 1, 2004,
through June 30, 2007) by failing to hold in
trust the $213,667.86 deposited with the
Waukesha County clerk of court. The referee
said presumably those funds represented
amounts generated in cases of former Cannon
& Dunphy clients other than Roger W. and Ken
K., and the money was apparently to abide
the outcome of Attorney Gende's action for
declaratory relief. The referee said
although the funds were not in Attorney
Gende's trust account, they were in a sense
in trust while they were on deposit with the
Waukesha County clerk of court. The referee
said the problem was the clerk of court
returned the funds by cashier's check and
upon receipt of the check, Attorney Gende
did not immediately re-deposit the money
into his trust account. Instead, he kept it
for approximately 20 days before he gave it
to his attorneys.
¶21 The referee went on to say although
Attorney Gende's failure to promptly
negotiate the check might be regarded as de
minimus, his attorneys did not negotiate the
check for an additional five months before
they finally deposited it into an interest-
bearing account and during those five months
the check was kept in a locked desk drawer.
Although the referee found Attorney Gende
violated SCR 20:1.15(d)(3), he said the
violation was somewhat technical and noted
that Attorney Gende did rely on bad advice
from his attorney. The referee said it did
not appear anyone else was harmed since
Attorney Gende did not use the money and the
money remained relatively secure.
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¶22 Turning to the appropriate sanction,
the referee began with the issue of
restitution and said Attorney Gende should
be required to pay the amounts owed to
Cannon & Dunphy in the Roger W. and Ken K.
matters, which total $20,221.76. The
referee rejected Attorney Gende's argument
that the statute of limitations had run on
Cannon & Dunphy's cause of action against
him, making restitution inappropriate.
¶23 In discussing the appropriate
sanction for Attorney Gende's misconduct,
the referee said a potential aggravating
factor was presented by Attorney Gende's
rapid repudiation of the separation
agreement. The referee said Cannon & Dunphy
quite understandably feels it tried to
accommodate Attorney Gende and was ill used
for its trouble, and Attorney Gende's
litigiousness undoubtedly cost the firm time
and resources. However, the referee said
that does not distinguish this case from
other examples of aggressive and aggravated
litigation and, without more, that would not
warrant professional discipline. The
referee said:
It is absolutely true that Mr.
Gende
has demonstrated that, at least with respect
to his dispute with [Cannon & Dunphy], he
has no filter. He seems unable to
distinguish good arguments from bad ones and
leaves no argument or allegation
unexpressed. Picking the wheat from the
chaff has been a challenge. . . .
Trust fund violations are
serious.
Lawyers must be scrupulous in handling other
people's money and Mr. Gende, at the end of
the day, was not. . . . This case is not
like the typical dishonest and deceptive
trust account case . . . . Mr. Gende did
not . . . attempt to "steal fees" through
deception. He tried to "steal" them by
convincing a court that he was entitled to
them. This was, at the end of the day,
largely a business dispute——albeit one that
Mr. Gende would have been better off to
avoid.
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¶24 This court will affirm a referee's
findings of fact unless they are clearly
erroneous. Conclusions of law are reviewed
de novo. In re Disciplinary Proceedings
Against Tully, 2005 WI 100, ¶25, 283 Wis.
2d 124, 699 N.W.2d 882. This court is free
to impose whatever discipline it deems
appropriate, regardless of the referee's
recommendation. In re Disciplinary
Proceedings Against Widule, 2003 WI 34,
¶44, 261 Wis. 2d 45, 660 N.W.2d 686.
¶25 Because they have not been shown to
be clearly erroneous, we adopt the referee's
findings of fact. We also agree with the
referee's conclusions of law and his
recommendation regarding the appropriate
level of discipline. We conclude that a
public reprimand is sufficient to achieve
the objectives of attorney discipline. As
the referee noted in his prefatory remarks
to his lengthy report and recommendation,
this is an unusual disciplinary case which
is, for the most part, a business dispute
between Attorney Gende and his former
employer. No client reported being
dissatisfied with Attorney Gende's
representation, and no clients were deprived
of funds to which they were entitled. The
referee commented, "On one level, what
followed was nothing more than a dispute
between Attorney Gende and [Cannon & Dunphy]
as to . . . fees. Mr. Gende and [Cannon &
Dunphy] litigated the latter's entitlement
to fees in a number of fora." The referee
referred to the lengthy dispute between
Attorney Gende and Cannon & Dunphy as
a "war." Although Attorney Gende was unable
to persuade any court that Cannon & Dunphy
was not entitled to the fees it claimed, the
referee found it significant that no court
found Attorney Gende's arguments to be
frivolous. While we agree with the referee
that Attorney Gende's conduct and his
repeated stalling tactics in an effort to
avoid paying fees owed to Cannon & Dunphy
were inappropriate, and that his conduct was
contrary to Wisconsin's Rules of
Professional Conduct for Attorneys, we agree
with the referee that under the unique facts
of this case a public reprimand is
sufficient to impress upon Attorney Gende
the seriousness of his actions and to deter
other attorneys from engaging in similar
conduct.
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¶26 The referee recommends that Attorney
Gende be assessed the full costs of the
proceeding. Attorney Gende has filed an
objection to the OLR's request for costs in
which he asserts that no costs should be
assessed. Attorney Gende asserts that he
has already paid a heavy price in terms of
time, effort, resources, money, and
sacrifices in combatting what he terms the
OLR's overzealous and largely unsuccessful
prosecution of him. The OLR director
asserts the full costs of the proceeding
should be assessed against Attorney Gende in
spite of the fact that the OLR prevailed on
only four of the 18 counts alleged in the
complaint.
¶27 Supreme court rule 22.24(1m)
provides that it is this court's general
policy upon a finding of misconduct to
impose all costs upon the respondent. In
cases involving extraordinary circumstances,
the court may, in the exercise of its
discretion, reduce the amount of costs
imposed upon a respondent. We do not find
this to be such an extraordinary case. As
the referee notes in his report, this case
was characterized by many disputes and
extended motion practice. The referee
specifically stated that had the OLR charged
fewer counts, it was unclear whether the
scope of the case would have been materially
narrowed and whether either party would have
spent much less time or fewer resources. In
addition, the referee said that "Mr. Gende,
to be frank, raised a number of stunningly
poor arguments here that required additional
effort by OLR and the referee. He ought to
bear the entire cost of this proceeding."
We agree.
¶28 IT IS ORDERED that James J. Gende II
is publicly reprimanded for his professional
misconduct.
¶29 IT IS FURTHER that within 60 days of
the date of this order, James J. Gende II
pay to Cannon & Dunphy $20,221.76,
representing the total amount owed to the
law firm in the Roger W. and Ken K. cases.
¶30 IT IS FURTHER ORDERED that within 60
days of the date of this order, James J.
Gende II shall pay to the Office of Lawyer
Regulation the costs of this proceeding. If
the costs are not paid within the time
specified and James J. Gende II has not
entered into a payment plan approved by the
Office of Lawyer Regulation, then the Office
of Lawyer Regulation is authorized to move
this court for a suspension of the license
of James J. Gende II to practice law in
Wisconsin.
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