Justice’s wife got $821,000 referral fee

Justice’s wife got $821,000 referral fee
Craig R. McCoy
Mar 03, 2013 (The Philadelphia Inquirer – McClatchy-Tribune Information Services via COMTEX) —

Her job is working as the top court aide to her husband, Pennsylvania Supreme Court Justice Seamus P. McCaffery.

She also has pursued another line of business over the last decade, referring potential plaintiffs to personal-injury law firms and getting paid handsomely for it.

McCaffery’s financial disclosures and other records show that on 18 occasions since 2003, private lawyers have paid referral fees to Rapaport for bringing them clients.

In the most recent example last year, a Philadelphia law firm paid her $821,000 — one-third of its fee in a multi-million-dollar medical malpractice case.

While the payments have come in, McCaffery has ruled on 11 cases in which some of the firms who have been paying the fees were participants. Lawyers in the cases say the justice never disclosed the fees, and some legal ethics scholars said he should have recused himself from the cases involving those firms.

In eight of those 11 appeals, McCaffery voted in favor of the legal position advanced by the firms that paid his wife.

In a letter sent to The Inquire on Fridayr, Dion G. Rassias, a lawyer for McCaffery and Rapaport, said that Rapaport had made “legitimate and proper” referrals to colleagues.

He said that because of her “excellent reputation and magnetic personality,” many clients from her days in private practice had come to her for “legal advice and representation” and that she had connected them to other lawyers.

As for the justice, Rassias said there was no valid reason for McCaffery to have disqualified himself from cases involving the firms.

He also said the newspasper had “distorted and manipulated innocuous facts and transactions in an effort to undermine and stain” the reputations of McCaffery and his wife.

In light of that, Rassias she had advised them not to talk to the paper, which had sought an interview with the couple since Feb. 12.

In response to questions from The Inquirer, state Supreme Court Chief Justice Ronald D. Castille was critical of the referral fees. He said Rapaport had failed to abide by court rules that requires employees to obtain his permission as chief justice before practicing law.

The Inquirer asked Castille whether he would permit her or any other attorneys working for the court to make the referrals.

“I would not,” he said in a written statement.

He said he would limit the practice of law by staff “because of the potential for conflicts of interest and the appearance of impropriety arising from a judge’s staff employee practicing law while receiving fair compensation while employed in a judicial chamber, and especially in a judicial chamber.”

The italics were Castille’s.

In his statement, Castille said his permission was needed because “attorneys referring cases … constitutes the practice of law.”

Rassias wrote in his letter, however, that “referring potential clients is not considered the practice of law in Pennsylvania, whether or not the referral results in fees to the referring attorney.”

Castille and McCaffery have been bitterly at odds in recent months, personally and professionally.

In interviews, law professors and other experts on legal ethics raised questions about the flow of referral fees to McCaffery’s wife.

“He should not sit on any case in which his family income comes from the firm handling the cases,” said Monroe H. Freedman, of Hofstra University Law School who has testified on legal ethics in courts and before Congress. “Unquestionably, he has to recuse himself on all of those cases.”

As a justice, McCaffery is paid $195,309 yearly. As chief administrative judicial assistant, Rapaport is paid $75,395 a year.

Rapaport has worked for the courts as a judicial aide for the past 16 years. On an official court ebsite for the state’s bar, she lists herself as an “active” attorney working for the Supreme Court. She gives her address as “Chambers of Justice McCaffery” 1500 Market St., Philadelphia.

On the site, Rapaport states she has no malpractice insurance “because I have no private clients.” In Rassias’ letter, he wrote that once Rapaport “began working within the court system, she stopped pracicing law.”

The disclosure rules for judges only require them to make public basic information about outside income — the source and the year. Judges need not reveal amounts paid or how money was earned.

Of the eight paying firms, five did not respond to repeated calls or said they could provide no information.

The others said they had made routine and appropriate payments to Rapaport for referrals. They wouldn’t identify the cases or say how much they paid her.

In the one payment made public, the firm of Fodera, Long & Lalli last year paid Rapaport the $821,519 referral fee. That was her share from the resolution of a suit alleging that a 2-year-old boy was left brain-damaged by doctors’ mistakes.

The documents show that the boy’s parents hired Leonard Fodera’s firm in 2007 and that Lise Rapaport, “Esquire,” made the referral.

There is no indication that Rapaport had any further involvement in the lawsuit. She never filed an official appearance as a lawyer in it. Marcy B. Tanker, a lead defense attorney for the hospital, said, “We never dealt with her.”

Unlike most states, the Pennsylvania Supreme Court has never adopted model rules recommended decades ago by the American Bar Association to limit fees to lawyers who do nothing more than refer the case.

Rapaport’s fee was disclosed only because the settlements of suits involving minors are filed publicly as a way to protect their rights.

In the case, the Fodera firm filed suit in 2009 on behalf of a Northeast Philadelphia couple who had taken their son to St. Christopher’s Hospital for Children in 2001 after he had a possible seizure.

The suit says doctors waited too long in giving him an antiviral drug. By the time the boy came home, it said, he’d been devastated by herpetic encephalitis that left him unable to talk, mentally damaged, legally blind, incontinent and epileptic.

The case was settled for $7.5 million. Fodera’s firm kept a third as a fee. It, in turn, paid Rapaport a third of that — the “third of a third” that has long been a norm for referrals nationwide.

The boy’s parents signed a court document that spelled out the payment to Rapaport. The family declined comment in person and by phone.In his letter, Rassias said the family was “very upset” at the attempts to contact them.

Fodera, in a brief interview, said only “There really is no issue” with the referral fees. He did not elaborate or return follow-up phone calls.

His firm was the most frequent source of such fees for the McCaffery household, paying them in 2003, 2004, 2005, 2009 and in the malpractice case in 2012.

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Perhaps still best known for cracking down on unruly fans at “Eagles Court” 15 years ago, McCaffery, 62, in more recent years has joined with Castille in overhauling Philadelphia criminal courts to make sure more cases were tried on their merits.

He was in the news in November when a report on corruption in Philadelphia Traffic Court suggested, in part, that McCaffery had fixed a ticket issued to Rapaport. The justice denied this.

The investigative report was written by a consultant hired at Castille’s suggestion.

McCaffery’s anger over the public release of the embarrassing report exacerbated long-standing tension between him and Castille. With McCaffery’s backing, sources say, in January Castille’s fellow justices took away his role as overseer of Philadelphia’s courts.

A former police officer, McCaffery became a judge in Philadelphia Municipal Court in 1994. He began serving on State Superior Court in 2004 and on the Supreme Court in 2008.

He and Rapaport married in 1990. His wife, 61, who has an undergraduate degree from Harvard University and a law degree from the University of Pennsylvania, worked as an assistant district attorney in Philadelphia from 1979 until 1984, and then as a private lawyer until 1997.

She joined her husband that year as a judicial secretary and has been his aide ever since.

Of the more than 50 judges who have served on state appeals courts since McCaffery joined the Superior Court bench in 2004, at least eight were married to practicing lawyers.

None of those lawyers was employed by the courts.

The referral fees first appear in McCaffery’s financial disclosure forms in 2003, the year he ran for the appeals bench. There were no payments during his previous nine years on Municipal Court, according to his disclosure forms.

Over the years McCaffery has changed how he described the payments.

At first, from 2003 until 2007, he did not specify whether the money had been paid to him or his wife.

After joining the Supreme Court in 2008, he added the word “spouse” next to each listed payment.

In his letter, Rassias said any suggestion that McCaffery himself had been paid a referral fee was “completely baseless.”

As a judge, McCaffery cannot be a practicing attorney. The Pennsylvania Code of Judicial Conduct says flatly, “Judges should not practice law.”

Judicial rules also govern referral fees somewhat — and also regulate the practice of law by employees of the court system.

For one thing, the rules stipulate that only lawyers may be paid referral fees.

Along with the rule requiring approval from a chief justice, other court policies cover the practice of law by employees. They say aides must first obtain approval from the judge who supervises them.

In Rapaport’s case, this rule meant she would have needed permission to practice law from her husband, also her supervisor. A court administration spokesman said that only McCaffery could say if that had happened.

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Of the firms that paid Rapaport, leaders of five didn’t return repeated telephone call. Attorneys with the others provided some information, but would not name the underlying cases or say how much they paid Rapaport.

Fodera, who was a classmate of McCaffery’s at Temple University Law School, declined did not grant an interview after the initial conversation.

In an interview, Peter S. Friedman, founder of the Friedman Schuman firm in Montgomery County, said he knew nothing about the firms’ payments, but would look into them. He didn’t return follow-up calls. (Justice McCaffery’s brother, Daniel, is a member of the Friedman firm.)

Robert Mongeluzzi, a founder of a Philadelphia personal-injury firm expert in construction accidents, did not respond to repeated calls.

Neither did Howell K. Rosenberg, a founder of Brookman, Rosenberg, Brown and Sandler, a pioneer in asbestos litigation.

Rosenberg was briefly quoted in a 2010 Legal Intelligencer article that took note of McCaffery’s financial disclosures. Rosenberg, a member of the Supreme Court’s Disciplinary Board for lawyers, said at the time that he knew of no rule barring judges’ aides from making referrals.

“I would not think it would be problematic,” he said.

Charles E. Schmidt Jr., of Schmidt Kramer, a Harrisburg firm, said it had paid Rapaport a referral fee out of a settlement stemming from a fatal car crash. He said the settlement amount was “significant.”

Mark A. Cunningham, a lawyer in Marlton N.J., said Rapaport had referred at least one case to him because she wasn’t licensed to practice law in New Jersey.

George Martin, a founder of a now-disbanded Philadelphia firm, Martin Banks Pond Lehocky & Wilson, said that a firm lawyer, Samuel Pond, had paid Rapaport for sending along several workers compensation cases.

Martin said the cases had been resolved fairly quickly and the sums paid Rapaport were “modest amounts.” Pond didn’t return calls.

Abraham C. Reich, the cochair of the Philadelphia firm of Fox Rothschild, said the referral dated to a case settled in 1992. This cleared the way for annual payments, he said.

“The firm continued to receive payments thereafter and it honored the referral arrangement,” Reich wrote in an e-mail. “The amounts paid are not significant.”

In his disclosure McCaffery said the Fox Rothschild payments were in 2008 and 2009.

Reich didn’t respond to requests to explain the 16-year lag between the settling of the case and payment to Rapaport. ***

Without knowing names of plaintiffs in a suit, it is impossible to trace through the court system any specific case in which the McCaffery household received the payments.

Court dockets do show that McCaffery took part in the 11 cases since 2008 in which the lawyers taking one position or another were from firms that had paid referral fees to his wife. The firms represented direct participants in seven of the cases, and filed friend-of-the-court briefs in the others.

In an interview, Geoffrey C. Hazard Jr., an emeritus professor at Hastings College School of Law in San Francisco and expert on legal ethical issues, said McCaffery should have recused from those cases.

Hazard, also an emeritus professor at the University of Pennsylvania Law School, said the public would likely be troubled both by Rapaport acceptane of the fees and the fact that her husband had voted on cases involving the firms.

“In the public’s mind it is wrong and in the mind of some people who are concerned with judicial ethics, it’s wrong,” Hazard said.

Leslie W. Abramson, a University of Louisville Law School professor who has studied the ethical issues facing judges and lawyer/relatives, stopped short of calling for recusal.

But, Abramson said, “He should have dealt with that by disclosure.”

In his letter, Rassias said such a “rigid” recusal standard was not legally required and would mean the high court would “likely never” have a full complment of judges to decide any case. Rassias underlined the word never.

As for the lawyers who had a role in the 11 cases, most were unwilling to say whether they believed McCaffery should have revealed the payments.

One who was would comment was Thomas More Marrone, on the losing side of a 2011 appeal. “To me it doesn’t matter,” he said.

“I think he is a terrific justice,” Marrone said of McCaffery. “I think he’s fair. I think he’s as fair as the day is long.”

But Charles S. Katz Jr., a Paoli lawyer who lost a 2008 case, said the first time he heard about the payments was from a reporter.

“Had I known about it, I would have expected him to recuse himself,” Katz said.

The state Code of Judicial Conduct mandates that judges disqualify themselves when their husband or wife is scheduled to be a lawyer directly before them in court.

The rules are more ambiguous for cases in which a spouse is not involved in the case, but someone else from their firm is.

On one hand, the code says the fact that a spouse is affiliated with the firm in a case “does not of itself” disqualify the judge. On the other, it says judges should in general consider recusing when their “impartiality might reasonably be questioned.”

Citing this standard, the state Superior Court late last year sharply criticized a Philadelphia judge, Allan L. Tereshko, for failing to disclose in a case that his attorney-wife worked for a law firm defending an insurance company in a workplace-injury lawsuit.

For years, Tereshko also failed to list his wife’s employer on his disclosure forms. He recently corrected that omission, filing amended reports with state court administrators.

The appeals court noted its “disapproval” of Tereshko, though his wife had not been a lawyer in the specific suit before him and was a salaried employee of the firm, not a partner sharing in profits.

Tereshko declined comment for this story.

Long unpopular among the personal-injury bar, Tereshko immediately resigned as supervising judge for civil suits in Philadelphia, but sought to keep hearing such cases.

The state Supreme Court exacted a harsher punishment. The justices removed Tereshko from civil court entirely, effectively demoting him. McCaffery was among the justices most determined to see him removed, sources in the legal community said.

In January, the high court reassigned Tereshko to hear cases involving juveniles. This was his job 20 years earlier when he first became a judge.

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Contact staff writer Craig R. McCoy at 215-854-4821 or [email protected].

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