Today allies of 7 defendants in a suit that I have filed on behalf of Berkeley Town House Cooperative Corporation have been in the halls canvassing for signatures.
They want co-op members to sign a waiver that will allow Fred M. Feller, the attorney representing the defendants, to represent the co-op at the same time, and will also allow the board of directors, which is controlled by defendants, to manage the corporation’s position in the lawsuit.
In support of their campaign, they are circulating an excerpt from a memo by Feller. In the memo, Feller admits that there are conflicts but doesn’t describe them. He gives only one reason to sign the waiver: saving money. Feller says he is now representing the co-op for free, but, if he stops representing it, the co-op will probably have to pay out of its own funds for another attorney.
Feller’s allegation is rubbish, and here’s why.
1. The co-op is not getting legal services for free in this litigation. During the last 2 fiscal years, co-op president Almalee Henderson, ex-manager Pamela Oettel, and current manager Christopher Stanley paid $66,000 for excess legal services, practically all for advice and representation related to this lawsuit. It’s excess in two ways: (1) It is the amount in excess of what was spent during the 2 prior years; (2) it is legal advice from an additional attorney, on top of the advice that Feller is providing. This splurge led to a 16% increase in assessments this year, and as the case goes to trial “you ain’t seen nothin’ yet” will probably apply. The reason is simple. As the court said in its ruling disqualifying Feller, “Town House is controlled by the Director Defendants”. The defendants dominate the board of directors and occupy the presidency. So, not surprisingly, the board is giving defendant Henderson and manager Stanley a blank check. They spend as much as they want, without even requesting the board’s OK, and they are raiding the corporate treasury to get legal advice that is purportedly for the corporation, but is kept secret by the defendants and benefits the defendants. This is a blatant violation of various provisions of state law and the corporate bylaws. The bottom line is this: The defendants are misusing BTH’s treasury as a bottomless personal-legal-defense piggy-bank. Consenting to a conflict waiver will let them keep right on doing that. Conversely, rejecting the conflict waiver will take control of the corporation’s legal position in this case away from the defendants and stop them from (mis)spending the co-op’s money on their personal defense.
2. The corporation needs only a minor amount of legal representation in this case. Feller tried to persuade the court that his dual role was saving the co-op a lot of money, but the court didn’t buy Feller’s argument. The ruling said that “defendants have not explained why Town House will need to engage in a robust defense or otherwise expend significant amounts in participating in this action”. This follows naturally from the fact that I, as plaintiff, am making the case against the defendants for the benefit of the corporation. The corporation doesn’t need to do that. Therefore, if a waiver were denied, and the defendants therefore weren’t abusing the co-op treasury for their personal defense, the corporation’s legal expenses would be drastically decreased.
3. It is possible that, if the waiver were rejected, BTH’s legal expenses on this case would not just decrease, but sink from $33,000 per year to zero. How zero? BTH has legal-defense rights under its insurance policy with Travelers Property Casualty Company of America. That is a huge and complex policy, running some 145 pages long. If the court affirms its order to Feller to stop representing BTH, BTH will ask Travelers to pay for a separate attorney, just as Travelers is now paying for Feller. Travelers will reply. That inquiry has not occurred, because the court order has not yet become permanent. My own guess is that Travelers will not be able to escape from an obligation to pay for a separate attorney. One reason is that my suit is partly a claim for $2,000 in penalties against the corporation itself. Feller slyly writes “The indication from the insurer is that they will not pay for separate representation.” “The indication”? What’s that? Probably some phone call in which Feller and his insurance-company buddy (Feller basically works for insurance companies) agree that it’s OK for Feller to say “the indication is”. Don’t forget, when Feller talks, he is saying what his defendant clients want him to say, and they desperately want to remain in control of the corporation-funded personal-defense piggy-bank.
4. It is pure propaganda to say, as Feller does, that he “represents” the co-op. He actually represents the people who have wasted the co-op’s assets, endangered the co-op members’ lives and property, and denied the co-op members’ democratic rights, and who therefore owe the co-op hundreds of thousands of dollars in compensation. My lawsuit aims to get that compensation paid to the co-op and the other acts of misconduct stopped. I seek a judgment against the defendants, which Travelers will indemnify them for. It is a fundamental principle of the law and the legal profession that an attorney cannot represent two parties with conflicting interests. It’s hard to imagine a more serious conflict than the one between BTH and those who have grievously damaged it. If Feller is willing to give BTH “free” representation, the reason is obvious. By doing that, he prevents the co-op from having truly competent and loyal counsel. He can assure that BTH doesn’t act in its own best interest, but instead remains a captive of those who have wronged it. What a great deal for Feller. I’m sure he’d be happy to represent me for free, too.
We have all heard the adage, “He who acts as his own attorney has a fool for a client.” Feller would have BTH members believe that “He who lets an opposing party’s attorney represent him for free is an intelligent client.” Try that one out on the nearest 6-year-old, and see what reaction you get.