Refusal to return files may lead to 3-year suspension

A Sherman Oaks lawyer, who after he was fired refused to return his clients’ files until they paid his legal fees, faces a possible three-year loss of his license. In a ruling last month, the State Bar Court review department also recommended a five-year probation for JOEL DRUM [#92607], 50, but rejected a hearing judge’s recommendation that Drum be disbarred.

Although the review department harshly criticized Drum for both his misconduct and his refusal to accept responsibility, it nonetheless said his actions did not warrant disbarment.

Drum had appealed after Judge Alban I. Niles found that he committed several acts of misconduct by withholding hundreds of files from his clients, two insurance companies, until they agreed to pay him. In addition, Niles found, he continued to represent the companies after he was fired, engaged in frivolous litigation to avoid returning the files and failed to pay sanctions on time or report the sanctions to the State Bar.

Drum was hired in 1993 by Farmers Insurance Exchange and in 1995 by Midland Risk Insurance Co. to represent them in subrogation matters under contingency fee agreements.

Farmers fired Drum in 1998 and requested the return of 175 files. Drum refused, demanding an agreement for his compensation. Arguing that keeping the files was unethical, Farmers sued Drum several months later and won an order that Drum return the files. The Court of Appeal dismissed Drum’s appeal and imposed sanctions of $3,320 for filing a frivolous appeal “for the sole purpose of achieving delay.”

The Court of Appeal characterized Drum’s actions as “nothing less than a greedy, illegal and egocentric attempt to force Farmers into a compensation settlement by holding Farmers’ files hostage.” After the California Supreme Court denied Drum’s petition for review, Drum returned all but 16 files that he claimed he did not need to return because they were closed.

He also continued to represent Farmers in the subrogation cases after he was fired.

According to court documents, Farmers spent $81,000 attempting to recover its files and in continued litigation with Drum.

Midland fired Drum in 1999 and also requested the return of its files; Drum again refused until agreement was reached about his compensation. Midland sued Drum and won a court order that he return the files, which he did. Midland paid $8,865 in attorney fees and $988 in costs to recover the files.

Drum continued to represent Midland in the subrogation cases after he was fired.

In mitigation, the review department found that Drum practiced for 19 years without a discipline record.

In seeking review, Drum said he was denied a fair trial before the bar court because the judge was biased against him and his witnesses and made disparaging remarks. He also argued that the judge improperly admitted a letter Drum wrote that resulted in the denial of a fair trial. The review judge pointed out that the letter, written to an arbitrator, began “Dear Asshole,” and continued “in a similarly disparaging vein.”

Drum also said his clients could not discharge him without cause and said he had a legitimate basis for keeping the files in the face of discharge because of the unique nature of subrogation cases, for which an attorney must rely on aggregate recovery in a high volume of cases.

The review department rejected Drum’s claims, and said his justification for refusing to return the files “defies logic.” Instead, it concluded that Drum’s motivation was to hold the files hostage, agreeing with both the hearing judge and the appellate court that Drum’s “objective was unmistakably delay aimed solely to protect his own pocketbook.”

The review judges also criticized Drum for using an “oppressive method . . . to collect his fees,” for trying to defend his actions through frivolous litigation, and for trying to blame others for his conduct.

Drum’s “lack of insight and remorse are very troubling and are a strong indicator that the risk of future misconduct is great,” wrote the review judges. “Undeterred by any of his failed attempts to advance his patently unfounded legal theory and the imposition of substantial sanctions, he continues to assert that he has acted in good faith and that he has done nothing for which to atone.”

Drum asked for a rehearing last month, based on factual and legal errors. At the conclusion of his petition, he stated, “If the court’s members can live with this decision then Drum will consider his status a badge of honor for standing up to the powers that be and maintain his position, even when the forces of the law are unfairly bound against him.”