Bloomberg Law
Sept. 20, 2021, 8:01 AM

Tom Girardi’s Downfall Delivers Ethics Lessons for Lawyers

Dina Sayegh Doll
Dina Sayegh Doll
Doll Amir & Eley LLP

The Covid-19 lockdown in March of 2020 closed courts across the country, meaning there were no new verdicts and no urgency for defendants to pay settlements. For former plaintiff’s attorney Tom Girardi, who is now federally disbarred and whose firm, Girardi & Keese, is in involuntary bankruptcy and receivership, it was the beginning of the end of his seemingly illustrious career.

Girardi’s career includes his work with Ed Masry on the environmental contamination case dramatized in the film “Erin Brockovich” in 2000 and his representation of families of victims of the Lion Air crash in 2018 that killed all 189 on board.

As lawyers, we must repair the incalculable harm his actions caused the legal profession. We can start with these three ethical lessons.

Failure to Maintain Funds in Client Trust Account

According to court filings by the California State Bar, Girardi allegedly failed to maintain the funds that belonged to his clients in their respective client trust accounts (CTA) as was required. In January 2021, Girardi went as far as to leave a voice mail for his co-counsel, Jay Edelson at Edelson P.C., saying that he had paid their clients the full $2 million Lion Air settlement amount due from their CTA. Despite being co-counsel, Girardi had exclusive control and was the sole signatory on the CTAs.

One of the many lessons for the state bar is that it needs a more rigorous CTA monitoring process and new regulations to avoid this type of misappropriation in the future. The lesson for lawyers is to conduct more internal monitoring of their firm’s CTA accounts.

If more than one lawyer is a signator, each signatory should review every deposit and withdrawal and be aware of the deadlines for when clients must be paid the money from the account. Even if a lawyer is not a signator, if there is any suspicion of misappropriation or commingling of money, the lawyer should escalate the issue within the law firm, and if not resolved internally, to the state bar for review. The ethical treatment of clients must be always forefront in our minds.

Failure to Maintain Malpractice Insurance

California’s Rules of Professional Conduct do not require lawyers to maintain malpractice insurance, they only require that a lawyer who does not carry insurance must disclose that fact to clients. According to a 2018 survey, 39% of sole practitioners, and 12% of lawyers at small firms with between two and five lawyers do not carry liability insurance.

Girardi’s firm did not have malpractice insurance. Although it is unclear whether insurance would have covered the losses in this instance because of the allegations of intentional misconduct, the state bar should reconsider how it handles this issue.

Disclosure is not enough of a protection. There is a vast power imbalance, both with the client’s likely lack of understanding of any boilerplate disclosure in the retainer agreement and with the usually dire circumstances a client is in that precipitates the need for a lawyer in the first place. All lawyers should have to maintain malpractice insurance.

A Request to Terminate Attorney-Client Relationship

Girardi’s wife, Erika Jayne, one of the cast members of “The Real Housewives of Beverly Hills,” filed for divorce in November 2020. The filing generated a huge amount of publicity and speculation as to whether she had knowledge of her husband’s alleged dealings, and specifically whether her companies received any of his client’s settlement money.

On June 15, her lawyers filed to withdraw as her counsel, stating that the “relationship of trust and confidence that is essential to a properly functioning attorney-client relationship has broken down, and in good faith assessment of counsel, the relationship is irreparable.”

The request to withdraw was widely reported because of the high-profile nature of the case, and the filing came one day after the premier of the documentary about Girardi and Jayne, “The Housewife and the Hustler.” Two days later, on June 17, her lawyers voluntarily withdrew their request to withdraw from her case, without further comment. In the court of public opinion, however, the damage was already done.

According to the California Rules of Professional Conduct regarding lawyer-client relationships and specifically dealing with the termination of representation: “A lawyer shall not terminate a representation until the lawyer has taken reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client.”

Arguably, the filing of the request to withdraw in and of itself prejudiced Jayne, especially coming so close to the release of the documentary and the wording used in the filing. It would be reasonable to believe that the words “trust” and “broken down” meant that the lawyers believed their client was lying to them based on new information they received either from the documentary, or from court filings. The problem is that in a span of only two days the attorneys changed their mind about how they viewed their attorney-client relationship.

The ethical lesson for attorneys is that the attorney-client relationship is sacrosanct and there is always a power imbalance, even if the client is a celebrity and in the public eye. The actions by her attorneys created an impression that she was lying, and once someone’s credibility is harmed it is very difficult to rehabilitate.

As more is revealed about the alleged actions of Tom Girardi, we as lawyers should strive to learn every lesson and take whatever action necessary to regain the public’s trust in our profession.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Dina Sayegh Doll is an attorney, television commentator, and certified mediator. She practiced law at Gibson Dunn & Crutcher LLP before co-founding the firm Doll Amir & Eley LLP. She is a legal analyst for the Law & Crime Network and regularly appears on a wide range of media.

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