The Washington Times

May 28, 2004

Abuse of privilege

By Phil Kent

    When Congress created the U.S. Trustee Program as a pilot project in the 1978 Bankruptcy Reform Act, it intended for those trustees to act as a "watchdog" to monitor the integrity of how bankruptcy cases are administered. Sad to say, the watchdog today is too busy catnapping on the porch — and those seeking justice are instead being robbed blind by the very lawyers who purport to be on their side.

    The most alarming example of this is a bankruptcy case in Kentucky where three out of 50 plaintiffs crawled away with a total of $2,206, while their lawyer, John O. Morgan Jr., danced away with $1.32 million. Mr. Morgan had the audacity to add to his clients' pain and suffering by pocketing about $600 for every dollar he won in the case against the check-cashing industry. Some clients got nothing.

    It's one of the most blatant examples to date of lawyers winning the coal mines while their clients are getting the shaft.

    Think of the cost to society and consumers: A 1994 report shows $152 billion wasted on lawsuit abuse. Some states, including Ohio, have even launched a Lawsuit Awareness Week to highlight irresponsible cases of stupendous proportions. These cases take years to resolve, tying up important courtroom time that could be used by real victims, and the lawyer's take is as high as 70 cents on the dollar.

    Victims of bankruptcy are forced to begrudgingly approve scandalous lawyers' fees and are then prohibited from objecting. It has become nothing short of financial terrorism. While Mr. Morgan hides behind the robes of the federal judges he says approved his outrageous fees, he is likely just one of a multitude of lawyers taking gross advantage of their clients.

    In Mr. Morgan's personal crusade against the check-cashing industry, how could nearly all of the clients have been left penniless from a settlement that made him millions?

    Was this really justice for those in bankruptcy, or a new form of class action by the lawyers and for the lawyers? That this case received scant scrutiny by the media, which defends Mr. Morgan and his millionaire winnings, is troublesome indeed.

    Mr. Morgan has been allowed to dupe his clients out of their confidence and cash. Many fat-cat class-action lawyers are charging as much as $30,000 an hour, an obscene amount of money, no matter how much work was involved or how many hours were billed. In Louisiana, 17 law firms collected $575 million in legal fees for one case but refused to make their billing public. That looks to be about $6.7 million per hour.

    Kentuckians need protection against these predatory lawyers who argue in court that they are capable of representing bankruptcy clients, win the case, and then take center stage and keep the money and red roses for themselves. Mr. Morgan and other lawyers like him must be held accountable to the public and to lawmakers. Bankruptcy lawyers should be forced to disclose all of their winning fees and the resulting financial situations of their clients. Most Kentuckians would agree the money should be turned over to the real victims — those who are bankrupted not once, but twice, by lawyers like Mr. Morgan.

    Mr. Morgan is a poster boy for all that is wrong with the legal system. His colleagues in the legal profession need to voice their discontent with this sort of practice and institute guidelines in the bar association to better police their members.

    Finally, Congress created this monster. Now Congress must act and pass meaningful tort reform to protect Americans facing bankruptcy.

Phil Kent is an Atlanta public relations consultant and author of "The Dark Side of Liberalism."

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