Referral fees given to wife of Pa. Supreme Court justice raises questions

Posted: March 05, 2013

To our readers: A draft of this story appeared inadvertently for several hours Sunday on the Philly.com website.

Over the last decade, the wife of Pennsylvania Supreme Court Justice Seamus P. McCaffery - his chief judicial aide - has received 18 payments as referral fees for connecting law firms with clients.

In the most recent payment, McCaffery's wife, lawyer Lise Rapaport, received $821,000 - her fee from a settlement in a multimillion-dollar medical malpractice case.

Court records and McCaffery's state-mandated public financial-disclosure forms list the 18 instances in which his wife received a referral fee.

A lawyer for the couple, and attorneys with the firms, say the fees were routine and proper.

But the high court's chief justice, Ronald D. Castille, questioned Rapaport's making referrals, as did some legal experts contacted by The Inquirer.

Castille said they raised 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."

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

As the fees have come in, McCaffery has ruled on 11 Supreme Court cases in which some of the firms tied to the fees were participants. Lawyers in the cases say the justice never disclosed the fees.

In eight of those 11 appeals, McCaffery voted in favor of the legal position advanced by the firms that had received referrals from Rapaport in other cases.

Referral fees are normal practice in Pennsylvania. An attorney who refers a client to a firm shares in any eventual settlement or award. It is typically one-third of the primary law firm's contingency fee, which is also one-third. There is no requirement in Pennsylvania that he referring lawyer perform any work on the case.

State judicial rules do not specifically require state Supreme Court justices to disclose from the bench that a family member has received such referral payments.

There is no indication any of those cases in which McCaffery participated were ones in which his wife had received a referral fee.

His participation apparently came in appeals in other cases involving various lawyers from the firms, either as litigants or in friend-of-the court briefs.

The state Code of Judicial Conduct says judges should in general consider recusing themselves when their "impartiality might reasonably be questioned."

However, the code also says the fact that a spouse is affiliated with the firm in a case before the court "does not of itself" disqualify the judge.

In interviews, three law professors expert in judicial ethics said McCaffery should have disclosed the payments or recused himself in all cases involving the firms associated with the referrals. Two other experts said they saw no obligation to disclose.

Lawrence J. Fox, former managing partner of Drinker, Biddle & Reath in Philadelphia, who counsels law firms on professional responsibility and ethics, saw no obligation for McCaffery to tell other litigants about the fees his wife received, but he said he agreed completely with Castille's objections. He said Rapaport should not have been paid for the referrals while employed by the courts.

"I think he's right," said Fox, founder of the Ethics Bureau at Yale University Law School.

Dion G. Rassias, a lawyer for McCaffery and Rapaport, said in a letter to The Inquirer on Friday 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.

In a complex debate, the two justices now differ about whether making referrals constitutes "the practice of law."

Castille said it does. The lawyer for McCaffery and Rapaport said it does not.

Five experts on legal ethics said they believed referrals were the practice of law.

The issue has assumed importance because under court personnel policies, lawyers who work for the court must first get approval from the chief justice before practicing law.

The Inquirer asked Castille whether he would permit Rapaport or other lawyers on the court staff to make referrals.

"I would not," he said in a written statement. Castille said Rapaport never sought that permission.

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

Rassias characterized The Inquirer's questions about the referral fees as "simply a masquerade" for an attack on McCaffery, and said he had advised McCaffery and Rapaport not to talk to the paper. The Inquirer first sought an interview with the couple Feb. 12.

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 since 1997. Before that, she was an assistant district attorney for five years and was in private practice for 13 years.

The referral fees first appear on McCaffery's financial-disclosure forms in 2003, the year he ran for the appeals bench. There were no such fees during his nine years on Philadelphia Municipal Court, according to his disclosure forms, including the six years Rapaport was a court secretary in Municipal Court.

On an official court website for the state bar, Rapaport lists herself as a lawyer 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 practicing law."

Public information about the fees is not extensive. Disclosure rules for judges require them only to make public basic information about outside income for a judge and his spouse - the source and the year. Judges need not reveal amounts paid or how the money was earned.

Of the eight firms involved with referrals, five did not respond to repeated calls.

The others said the referral fees to Rapaport were routine and appropriate. One said his firm was among three Rapaport suggested to a client as a possible hire.

The private lawyers wouldn't identify the cases or say how much Rapaport had received.

Fee in child's case

In the one fee made public, Rapaport received a referral in the amount of $821,519. That was her share from the resolution of a suit filed by the firm Fodera, Long & Lalli alleging that a 2-year-old boy was 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.

The amount of Rapaport's fee was disclosed 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, which 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 of that. Rapaport received the "third of a third."

The boy's parents signed a court document that spelled out the payment to Rapaport. The family declined to comment in person or 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 on that or other fees.

His firm, which changed names several times, is listed as a source of referral income for Rapaport in 2003, 2004, 2005, 2009, and in the malpractice case in 2012.

Traffic Court report

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 that.

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, Castille's fellow justices in January took away his role as overseer of Philadelphia's courts.

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

He and Rapaport married in 1990. His wife, 61, has an undergraduate degree from Harvard University and a law degree from the University of Pennsylvania.

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

For one thing, the rules stipulate that only lawyers can receive 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, that meant she would have needed permission to practice law from her husband, who was also her supervisor. In his letter, Rassias said that making referrals was not practicing law.

No comments from 5 firms

Of the firms that received referrals from Rapaport, leaders of five did not return repeated telephone calls. Lawyers with the others provided some information but would not name the underlying cases or say how much Rapaport had received.

In an interview, Peter S. Friedman, founder of the Friedman Schuman firm in Montgomery County, said he would look into the relevant cases. He didn't return follow-up calls. (McCaffery's brother, Daniel, is a member of the Friedman firm.)

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

Neither did Howell K. Rosenberg, a founder of Brookman, Rosenberg, Brown & 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 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 Rapaport's referral stemmed from a settlement after a fatal car crash. He said the settlement amount was "significant."

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

George Martin, a founder of a now-disbanded Philadelphia firm, Martin, Banks, Pond, Lehocky & Wilson, said a lawyer with that firm, Samuel Pond, had received referrals from Rapaport for several workers' compensation cases.

Martin said the sums Rapaport received were "modest amounts." Pond didn't return calls.

Abraham C. Reich, cochair of the Philadelphia firm of Fox Rothschild, said the referral dated to a case settled in 1992. That 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 income from referral fees in the Fox Rothschild matter came in 2008 and 2009.

In appeals involving Fox Rothschild clients, McCaffery voted against the firm's position in two cases and with it in a third.

"I feel very confident that our firm acted ethically and appropriately with respect to this matter," Reich said.

The issue of referrals

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.

Without knowing the names of plaintiffs in a suit, it is impossible to trace through the court system any specific case in which Rapaport received fees. Nor do the disclosure forms indicate whether the referral income comes from one case or several handled by the same law firm.

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 received referrals from his wife.

In interviews, law professors said the fees raised complicated issues, and they offered differing assessments.

Five legal scholars who are experts on ethics or the state Supreme Court said they saw referrals as being the practice of law.

On the issue of disclosure, Bruce Ledewitz, professor of law at Duquesne University and an expert on the state high court, said he did not think McCaffery was under an obligation to tell litigants about the referral fees.

Fox also said he did not believe McCaffery was obligated to disclose the fees, though he said he was troubled by the referrals in the first place.

Though it would be unfair to limit the ability of spouses of lawyers to practice law, Fox said, "it looks different because she's in his chambers."

"She's a public servant," he said.

In an initial interview, Monroe H. Freedman of the Hofstra University Law School said McCaffery should recuse himself from any cases involving the firms tied to referral fees.

Interviewed again Sunday and asked whether that was practical - especially in a profession in which judges are often married to lawyers - he said McCaffery should have disclosed the referrals or recused himself if he chose not to reveal them.

Freedman also said that should be the rule for any judges hearing cases in which the law firm before them employs a spouse.

Leslie W. Abramson, a University of Louisville Law School professor who has studied the ethical issues facing judges and lawyer/relatives, also said McCaffery should have disclosed the fees.

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

Hazard said the public would likely be troubled both by Rapaport's accepting the fees and the fact that her husband had voted on cases involving the firms.

"In the public's mind, it [McCaffery's participation in the cases] is wrong, and in the mind of some people who are concerned with judicial ethics, it's wrong," Hazard said.

In his letter, Rassias said there was no need or legal requirement for such a "rigid" recusal standard - one that he said would mean the high court would "likely never" have a full complement of judges to decide any cases.

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 fees.

One who 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 he had not known about the referral fees.

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

A judge and a spouse

The issue of a lawyer/spouse's relationship to a judge came up emphatically last year in a case before the state Superior Court.

In November, the Superior Court sharply criticized Philadelphia Common Pleas Court Judge Allan L. Tereshko for failing to disclose in a case that his wife, a lawyer, worked for a law firm defending an insurance company in a workplace-injury lawsuit.

In the Tereshko case, his wife was a salaried employee of a firm that specializes in defending personal-injury suits. Referral fees did not play a role.

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 not a partner sharing in profits.

Tereshko declined to comment for this article.

Tereshko resigned as supervising judge for civil suits in Philadelphia, but sought to keep hearing such cases. The Supreme Court instead removed Tereshko from civil court, effectively demoting him. McCaffery was among the justices determined to see him removed, sources in the legal community said.

In January, the high court reassigned Tereshko to hear juvenile-court cases, his job 20 years earlier, when he first became a judge.


Contact Craig R. McCoy at 215-854-4821 or cmccoy@phillynews.com.

Inquirer staff writer Joseph A. Slobodzian contributed to this article.

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