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8 février, 2008 16:54

Henry Gottlieb

New Jersey Law Journal

02-07-2008

Two lawyers facing one-year suspensions for sharing fees with employees at the defunct Tomar Simonoff firm argue that the payments were part of an ethical "bonus" plan, not a sleazy scheme like using runners.

Ronald Graziano, who was managing partner, and Michael Kaplan, a star litigator, made the argument in briefs filed Tuesday, asking the state Supreme Court to reverse suspension recommendations by the Disciplinary Review Board.

The petition for review gives the justices an opportunity to instruct firms on how to stay within ethical boundaries when establishing incentive pay plans for nonlawyer employees.

Tomar Simonoff, a 65-lawyer personal injury powerhouse in Cherry Hill, N.J., collapsed in 2000 amid allegations it paid illegal referral fees to administrators, secretaries and paralegals.

In an opinion last December, the DRB found that such payments were part of the firm culture and that Kaplan, Graziano and partner Charles Riley were the worst offenders. Eight other lawyers at the firm took part in or knew of the payments but deserved no punishment, the DRB said.

The firm, Tomar, Simonoff, Adourian, O'Brien, Kaplan, Jacoby & Graziano, went astray in the 1990s when it pegged the compensation of Robert Buccilli, the administrator of the Atlantic County, N.J., office in Northfield, to the branch revenues, the DRB said.

Under his 1990 contract, Buccilli was to receive $60,000 a year in salary and a bonus of 25 percent of the office revenue above $240,000. That deal was worth $807,020 in what the DRB called "referral fees" between 1992 and 1997.

Steven Kudatzky, who negotiated the deal with Buccilli shortly before he left to form his own firm, told ethics investigators he determined at the time that the arrangement complied with a 1979 ABA ethics pronouncement, Informal Opinion 1440.

That opinion says bonus arrangements are ethical if "the compensation relates to the net profits and business performance of the firm and not to the receipt of particular fees."

The DRB found fault with the Buccilli arrangement because the bonus was pegged to firm revenues, but the lawyers facing discipline say the emphasis should be on the words "particular fees."

Kaplan, who headed the Northfield office's litigation department, argues it is incorrect to make a distinction between "revenue" and "profits."

"What matters is not whether the payment is a percentage of the net or the gross, but rather whether the bonus is tied to specific cases," according to his brief, prepared by Arnold Mytelka of Kraemer, Burns, Mytelka, Lovell & Kulka.

"The arrangement approved by Kudatzky was that Buccilli would not be compensated based upon fees from specific cases, but rather upon an increase in the revenues of the firm's Atlantic County office over a certain threshold, with significant other revenues excluded," the brief says.

The brief cites commentary to a provision of the Restatement (Third) of Law Governing Lawyers, 10(3)c (2000), which says "compensation may be a percentage of or otherwise contingent on the lawyer's income, so long as the compensation is not contingent on the lawyer's revenue in an individual matter."

There was, to be sure, evidence before the DRB that Kaplan and Graziano were involved in other forms of fee-sharing with employees.

The evidence included statements by people in the firm that referral fees for secretaries and paralegals were a built-in part of the payroll structure.

In Graziano's case, the firm continued while he was managing partner to funnel shares to Buccilli, through Buccilli's wife, an attorney, when the firm decided to end his bonus deal in 1997, the DRB found.

But Kaplan and Graziano argue that even if payments to employees were made, a one-year suspension would be harsh.

They say that until 1997, when the Supreme Court established stiff penalties for fee-sharing in a runners case, In Re Pajerowski, 156 N.J. 509 (1998), there was no guidance to firms on whether policies like Tomar Simonoff's were ethical.

"Graziano had no reason to suspect, based upon the then-current state of the law that the policy would later be deemed to violate the ethical rules applied only to runner scenarios," Graziano argues in a brief by Kevin Marino of Marino Tortorella in Chatham, N.J.

Graziano and Kaplan also assert it would be unfair for them to lose their licenses for a year while the eight other lawyers with complicity, or at least knowledge, would receive no punishment under the DRB's recommendation.

The briefs also complain that the DRB violated due process by making findings against Kaplan and Graziano based on testimony in cases against various Tomar Simonoff lawyers in which Kaplan and Graziano were not represented.

The DRB based its recommendation on the findings of a special master, retired Superior Court Judge Herbert Friend.

The Office of Attorney Ethics entered into a stipulation of facts with Graziano, but the master made findings that went beyond the stipulation, "in the proceedings of other firm shareholders, in which Graziano was not permitted to participate," his brief says.

Those proceedings led to a recommended suspension of Graziano without him being permitted to participate, the brief says.

Graziano is now a solo in Cherry Hill. Kaplan is with Jarve Kaplan Granato in Marlton, N.J.