Before Steadman, Farrell and Ruiz, Associate Judges.
The opinion of the court was delivered by: Steadman, Associate Judge
On Report and Recommendation of the Board on Professional Responsibility
Briefly put, the issue in this bar disciplinary proceeding is whether an attorney may ethically enter into an agreement with an opposing party in which his clients are awarded full purchase price refunds (amid other relief) but where the attorney secretly and without the knowledge of the clients 1) receives (together with his co-counsel) $225,000 as attorneys fees and expenses, 2) agrees never to represent anyone with related claims against the opposing party, and 3) agrees to keep totally confidential and not to disclose to anyone all information learned during his investigations. *fn1
Before us is a unanimous report of the Board on Professional Responsibility ("Board") finding that respondent Mark M. Hager, a member of our bar, committed eight violations of our rules of professional conduct by, inter alia, entering into the above agreement. The Board recommends that respondent be suspended from the practice of law for one year. The record supports the Board's conclusions regarding the disciplinary violations, and we adopt the recommended sanction with a qualification concerning reinstatement.
The following statement of facts is adapted from the Hearing Committee's findings as adopted by the Board. *fn2 Respondent is a member of the District of Columbia Bar, admitted on April 28, 1989. He is a tenured professor of law at a local university, and he engages in a part-time legal practice.
In early 1997, Debra Duke and Erika Littlewood, both health care professionals, contacted respondent. They discussed with him pursuing legal action against Warner-Lambert Co. with respect to its head-lice shampoo Nix. According to Duke and Littlewood, Nix was ineffective in eradicating head lice because a Nix-resistant strain of lice had evolved. They had already informed Warner-Lambert of their concerns, but the company had denied that Nix-resistant lice existed, had refused to make labeling changes, and had refused to conduct any scientific studies.
Duke and Littlewood informed respondent that in pursuing their claims their goals would be to protect the public from Nix and to compel Warner-Lambert to change its labeling and advertising. Each woman executed a "Contingent Fee Agreement" with respondent and another attorney, John Traficonte, on or about May 13, 1997 (although Duke viewed respondent as her attorney from February 1997 on). The retainer agreement provided that Traficonte and respondent would "investigate potential bases for a class action suit brought in federal court against the manufacturers and/or suppliers of Nix shampoo, seeking refund of the purchase price, and other damages." It also specified that "one requirement of such a suit [would be] that 100 consumers be joined as class representatives," a condition resulting from respondent's plan to file a federal action under the Magnuson-Moss Warranty Act. See 15 U.S.C § 2310(d)(3)(C) (2000).
Respondent, together with Duke and Littlewood, worked to gather at least 100 claimants. Littlewood created a web site to generate names. She also sent out solicitation letters to pediatricians in Richmond, Virginia. The Roanoke, Virginia CBS affiliate broadcast an interview with Duke, and the Richmond Times-Dispatch published an interview with her husband. Names produced by these efforts were forwarded to respondent.
By June 1997, around 50 consumers had become clients and another 40 had expressed interest in joining the class action. Warner-Lambert then contacted Traficonte to begin settlement negotiations. Traficonte conducted the settlement talks alone, but he kept respondent aware of and involved in the negotiations.
In July 1997, respondent told Duke and Littlewood that negotiations with Warner-Lambert had begun. At the end of July, he informed them of an agreement but did not discuss any terms. On July 25, 1997, Littlewood discharged Traficonte and respondent as her attorneys. She asked for a list of current and potential clients, but Traficonte and respondent refused her. They did, however, send her $2,500 for her time and effort. On July 26, Traficonte informed Duke that respondent and he were only seeking refunds from Warner-Lambert and not any other forms of relief. After hearing this, Duke agreed that the attorneys could continue to represent her.
On August 8, 1997, Warner-Lambert, Traficonte and respondent entered into a "Settlement Agreement" without the knowledge of Duke, Littlewood, or any of their clients. The key provisions of the agreement may be summarized as follows:
1. Traficonte and respondent would not assert any Nix-related claims against Warner-Lambert on behalf of anyone, including their current clients.
2. Warner-Lambert would stop asserting Nix was 99% effective. It would add a money-back guarantee on the label. It would also "endeavor to form a panel of scientific experts" to study lice resistance to Nix and "would commit such resources as are reasonably necessary to follow the recommendations of the Panel."
3. Warner-Lambert would provide full purchase price refunds to the 90 consumers who had contacted the attorneys. If the total amount of refunds exceeded $10,000, the attorneys would reimburse the company for the difference.
4. Warner-Lambert would pay Traficonte and respondent "$225,000 for investigating, developing, preparing, advancing and addressing by negotiation with Warner-Lambert" potential claims concerning Nix.
5. None of the consumers' claims against Warner-Lambert would be released by the settlement.
6. The attorneys agreed "to maintain in strictest confidence, and to keep totally confidential and not to disclose in any manner (whether orally or in any form of writing) to any person or entity, any and all of the facts, legal theories, names of persons or potential lay or expert witnesses or any other information . . . which . . . was obtained . . . as a result of their work in relation to the Litigation."
7. All parties agreed "to maintain in strictest confidence, and to keep totally confidential and not to disclose in any manner the form and content of this Agreement and the obligations set forth hereunder, as well as the existence of the Agreement," except that the lawyers could inform the 90 consumers of:
(b) the change in the 99% effectiveness claim;
(c) the future money-back guarantee; and
(d) the scientific panel.
As the Board noted, "[i]t is undisputed that if Respondent and Mr. Traficonte had waived legal fees, Warner-Lambert would not have insisted on confidentiality and would have agreed to the other terms provided in the Settlement Agreement." Traficonte did at one point during negotiations ask that the fee provision not be kept confidential, but Warner-Lambert refused.
On August 26, Traficonte and respondent sent a letter to the 90 consumers that discussed only the settlement terms that the lawyers were allowed to disclose. It did not mention the fact or amount of attorneys' fees, the continuing viability of the consumers' claims, or the attorneys' promises not to bring any Nix-related suits and not to disseminate any Nix-related information. The letter concluded as follows:
[N]otwithstanding our best efforts, [we] have not assembled 100 consumers willing to agree in writing to function as class representative in a class action regarding [Nix]. Morever, the inherent scientific and legal difficulties in successfully prosecuting such a class action, together with the willingness of Warner-Lambert to make what we consider to be reasonable changes in its marketing of [Nix], have led [us] to the decision to abandon any further efforts in this regard.
Subsequently, Duke received $700 in refunds from Warner-Lambert. On November 20, 1997, she contacted both attorneys and asked if Warner-Lambert had paid them to abandon the representation. They declined to reply, but respondent did state that he had not ...