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Bruce E. Hawkins (WSBA No. 25414, admitted 1995), of Gig Harbor, was disbarred, effective February 3, 2006, by order of the Washington State Supreme Court following a stipulation approved by the Disciplinary Board. This discipline was based on his conduct between 2003 and 2004 involving businesses that promised, but did not achieve, reduction or elimination of credit-card debt.
Mr. Hawkins became involved with three nonlawyer-operated website businesses that promoted the ability to reduce or eliminate consumer credit-card debt through private arbitrations. At the request of one of the nonlawyers, Mr. Hawkins reviewed materials connected to the debt-elimination program and suggested changes. Mr. Hawkins allowed his name to be used in promotional materials for the program, including a DVD presentation that claimed that Mr. Hawkins "literally has over 98 percent success rate when he goes to arbitration." In these materials, which were mailed to potential program customers, Mr. Hawkins represented that credit-card debtors were not bound to the arbitration services specified in their cardholder agreements and should not have to repay their debt on a national bank's credit card because national banks cannot lend credit. Mr. Hawkins knew, however, that arbitration can be required only if both parties agree in advance that a court is the proper forum to resolve issues about the applicability of arbitration or the appropriateness of an arbitrator, and that since 1996 the Department of the Treasury, Office of the Comptroller of the Currency had decided it is "well established" that national banks can issue credit cards. Relying on Mr. Hawkins's representations, numerous credit-card debtors paid a fee and applied to the program through these websites. The debtors were then referred to a private arbitration service organized to facilitate the program.
In 2003, Mr. Hawkins set up Commercial Arbitration Forum, Inc. (CAFI), a Washington not-for-profit corporation. Mr. Hawkins was CAFI's sole shareholder and sole arbitrator. CAFI arbitrated matters referred to it by the aforementioned website businesses, which at the time needed a new arbitration service because prior arbitration services used by them had either been enjoined from issuing any further awards or had closed. Mr. Hawkins knew that CAFI would receive cases to arbitrate, because he endorsed the theory that a national banking association could not lend credit. CAFI arbitrations were conducted based only on documents mailed, faxed, or e-mailed to Mr. Hawkins by debtors using paperwork and briefing materials Mr. Hawkins had previously reviewed and modified on behalf of the website businesses. In conducting CAFI proceedings, Mr. Hawkins did not disclose to the debtors that he had a business relationship with the referring businesses. The first paragraph of each award signed by Mr. Hawkins stated, "no known conflict of interest exists between the Commercial Arbitration Forum . . . and the Claimant or Respondent," though Mr. Hawkins paid substantial sums to the referring businesses. As CAFI's arbitrator, Mr. Hawkins found for the debtor 90 percent of the time. In all of those cases, the creditor defaulted. Mr. Hawkins did not disclose to debtors his role in developing the program materials that were submitted to him as arbitrator.
In December 2003, Mr. Hawkins signed a CAFI arbitration award in favor of a claimant whose "claim" against a national bank was based on a debt owed under a line-of-credit agreement that did not contain an arbitration clause. In the arbitration award, Mr. Hawkins stated that "Claimant alleges an agreement was entered into between the Parties to resolve disputes through arbitration." Mr. Hawkins awarded the claimant $1,500 in attorney's fees and costs, even though the claimant appeared pro se, and he directed the bank to notify the three major credit bureaus that "there is a zero balance owed" by the claimant to the bank. As in all CAFI arbitrations, Mr. Hawkins relied on the sworn pleadings of the claimants, without either requiring additional proof of proper service of the arbitration demand on the national bank or reviewing the debtor's agreement with the bank to confirm it included an arbitration clause. He knew of no legal authority to support his position that one may go unilaterally to an arbitrator outside those specified in the credit-card agreement. The bank subsequently successfully sued the debtor on the debt.
In an August 2003 letter, another national bank provided "formal notice" to Mr. Hawkins that they "will not agree to arbitrate disputes before CAFI." Nevertheless, after August 2003, Mr. Hawkins entered 177 "awards" in favor of the bank's debtors.
After a debtor received an arbitration "award," the program materials advised the debtor to confirm the award in court. "Awards" issued by Mr. Hawkins and CAFI were rejected by courts in several instances, and, in at least one case in which a debtor attempted to confirm such an award, the court awarded attorney's fees and costs to the bank. By the end of 2003, Mr. Hawkins stopped taking new cases for arbitration, although he continued to arbitrate cases already filed. In the end, he arbitrated over a thousand CAFI arbitrations, charging $139 per matter. Mr. Hawkins collected over $100,000 for issuing CAFI arbitration awards.
In November 2003, a financial-services corporation obtained a temporary restraining order against CAFI and one of the corporation's debtors prohibiting them from conducting any more arbitrations in that debtor's case. Shortly thereafter, Mr. Hawkins sold the CAFI business and software to a non-lawyer friend, with payments to Mr. Hawkins tied to a percentage of income generated by the business (subsequently renamed "SAG") for as long as it maintained operations. In September 2004, a national bank filed for injunctive and declaratory relief in a Los Angeles County Superior Court against CAFI, SAG, and other so-called mailbox arbitration forums. CAFI defaulted. Eventually, the bank obtained a permanent injunction against CAFI, SAG, and other mailbox arbitration forums prohibiting any further arbitrations involving that bank's California customers.
When an Idaho corporation attempted to confirm SAG arbitration awards that it had received through an assignment, a national bank counterclaimed for injunctive relief. In December 2004, SAG and its owner stipulated to and the court entered a permanent injunction in the Idaho case. Among other things, the order enjoined SAG from "attempting in any manner to engage in arbitration or debt avoidance involving [the bank's] credit card customers through or in conjunction with any other entity or person . . . ."
In 2004, Mr. Hawkins began accepting cases referred to him by the aforementioned website businesses for the purpose of preparing materials for "pro se" debtors from various states. After a debtor submitted the application with a $200 "advance retainer," he or she would be referred to Mr. Hawkins, who would then enter into a separate fee agreement with the debtor based on a percentage of the debt to be "eliminated" and the number of credit cards. The usual fee was about 10 percent of the amount of the debt. Mr. Hawkins would pay 10 percent of the fee to the referring website business. During 2003 and 2004, Mr. Hawkins collected about $200,000 under such fee agreements.
In one instance, after assuring a debtor in Washington that the program was legal and (according to the debtor) that it was easy to get the awards confirmed in court, a debtor paid Mr. Hawkins over $5,700. Mr. Hawkins did not disclose his financial interest in SAG to the debtor. After receiving a number of SAG arbitration awards, the debtor was unable to confirm the awards in court and did not eliminate any credit-card debt. In at least two other cases in Washington, Mr. Hawkins appeared as the debtors' lawyer in superior court, attempting to rely on mailbox arbitration awards issued by SAG. Neither client in these two cases succeeded.
Mr. Hawkins did not disclose to program participants his financial interest in SAG. Nor did he disclose that it was very rare for anyone following his program to achieve a zero balance or any reduction on their credit-card debt. Mr. Hawkins did not disclose to program participants that only about five percent of cases achieved the goal of having their accounts closed with a "paid as agreed" notation (and that he considered such cases "a mistake on the part of the bank"). Mr. Hawkins did not disclose to program participants that program arbitrations produced favorable awards only by default, that as an arbitrator he did not review materials to ensure his jurisdiction over matters, or that he knew of no case decided in favor of a debtor when banks challenged the arbitration awards in court.
Mr. Hawkins's conduct violated RPC 5.4(a), prohibiting a lawyer from sharing legal fees with a nonlawyer; RPC 7.1(a) and (b), prohibiting a lawyer from making a false or misleading communication about the lawyer or the lawyer's services; RPC 8.4(c), prohibiting a lawyer from engaging in conduct involving dishonesty, fraud, deceit or misrepresentation; and RPC 8.4(d), prohibiting a lawyer from engaging in conduct that is prejudicial to the administration of justice.
Linda B. Eide and M. Craig Bray represented the Bar Association. Mr. Hawkins represented himself. Charles K. Wiggins was the hearing officer. |