A Lesson In Ambulance Chasing…

Want to know how ambulance chasing works? From the Appellate Division (Second Department) comes this story of attorney Henry Lung, censured today.

The  name of the runner or investigator is Virginia Mello. She finds the potential client in a very big automobile case in 2005. Mello is not an attorney.

Lung makes this offer to Mello: That if she gives him the case, he will then flip the case to a reputable firm in exchange for a referral fee to him of, I assume, 1/3 of the legal fee. And Lung, in exchange, will then give Mello 10% of his share. In cash.

The conspiracy is entered into and the case is then referred to Sullivan Papain Block McGrath & Cannavo, a well-regarded law firm that presumably knows nothing about the shenanigans that took place. They take the case in 2005 and settle in 2008 for $4.1M, a whopping big sum. Lung is given a $450K referral fee for the legal work that he did.

Lung then proceeds to make his cash payments to Mello…as per the decision today:

 Subsequent to receiving his share of the attorney’s fee, [Lung]  made cash payments to Ms. Mello in the sums of $11,500 in 2008, $8,500 in 2008, $8,650 in 2009, and $3,000 in 2009, as compensation for referring [the plaintiff] to him.

Thus, Lung gets censured by the Appellate Division on two separate issues:

1. Compensating a nonlawyer for recommending a client, and rewarded that nonlawyer for having made such a recommendation, resulting in employment; and
2. Sharing a legal fee with a nonlawyer

And Lung seems to have some other problems as well, given that he has previously been sanction  for misconduct:

[T]he respondent has a prior disciplinary history consisting of a Letter of Admonition, personally delivered, for negligently converting client funds, commingling personal funds with client funds, and communicating with a party known to be represented by counsel (March 2005); a Letter of Caution for failing to enter into a written retainer agreement with a matrimonial client and failing to provide the client with a Statement of Client’s Rights and Responsibilities (February 2006); a Letter of Caution for improperly seeking to limit his individual liability to a client for malpractice (February 2006); a Letter of Admonition for, inter alia, neglecting a client’s legal matter, improperly notarizing documents, and submitting a falsely notarized document to a court of law (February 2010); and a Letter of Admonition for improperly issuing a subpoena duces tecum in a criminal action (September 2011).

What can we conclude from this? First, that he has a damn good defense lawyer.  I’m stunned that Lung wasn’t disbarred, or at least suspended from practice. And I don’t see anything in the opinion about the need to disgorge the remaining part of the referral fee that he received.

Second, I often write about people outsourcing their marketing to others, such as those that sell “leads” on cases. And the question is, how were those leads procured? This is an example of how a dirty activity got laundered.

Third, let this be a warning to those that think allowing nonlawyers to buy an interest in a lawfirm is a good idea.

Fourth: The legal proceedings may not be over for Lung or for Mello. I don’t do criminal defense work, but I see an awful lot of cash flowing to her. Do you think Mello declared that money on her tax returns? How did Lung deal with that tax issue?

I’ll let the criminal defense folks weigh in on that one. But in the meantime, I think that part of his Avvo profile that says “No professional misconduct found” will be changing shortly.