IN THE MATTER OF
ROBERT HENRY SMALLENBERG
VSB DOCKET N0. 00-032-1370
On January 10, 2002, a meeting in this matter was held before a duly convened Third District, Section Two, Subcommittee consisting of Dr. James H. Slatton, Lay Member; John Tracy Walker, IV, Esq.; and Cary A. Ralston, Esq., Secretary and Acting Chair.
Pursuant to Part 6, Section IV, Paragraph 13(B)(5)(c)(ii)(d)(ii) of the Rules of the Supreme Court, the Third District, Section Two, Subcommittee of the Virginia State Bar hereby serves upon the Respondent the following Public Reprimand:
1. At all times relevant hereto the Respondent, Robert Henry Smallenberg [Smallenberg], has been an attorney licensed to practice law in the Commonwealth of Virginia. At all times relevant hereto, Smallenberg was an attorney employed by Ayres & Stolte, P.C. [the firm].
2. At some point in time Smallenberg was assigned to file a law suit against John F. Deal, Esq. [Deal], et als., for legal malpractice. Before or during his preparation for pursuit of the law suit, Smallenberg became aware of the following circumstances:
a. That Charles E. Ayers, Jr.[Ayers], one of the principals in the firm, had been the attorney for Alvin Jarrett and that Deal had replaced Ayers as attorney for Alvin Jarrett at some point in time.
b. That Ayers had, through Scott Stolte, Esq., one of the principals in the firm, filed a malicious prosecution action against Deal in Henrico County based upon Deal's cooperation with the Commonwealth's Attorney of Henrico County in the prosecution of Ayers for alleged criminal activity in his representation of Alvin Jarrett and that the action was nonsuited, refiled and dismissed with the imposition of sanctions on Ayers and Stolte in the amount of $4,958.04 which was later paid to Deal.
c. That subsequently a Second Settlement and Release Agreement [the second agreement] was entered into by the executors of the estate of Alvin Jarrett and Ayers by which claims the estate may have had against Deal and others were assigned to Ayers and two corporations in which Ayers was a principal and that the second agreement contained a provision in its paragraph 14 which did not allow any assignment of the rights of any party under the second agreement without the written consent of the other party.
d. That there was much anger and ill will on the part of Ayers against Deal.
If called to testify, Smallenberg would state that he learned of the ill will between Ayers and Deal sometime after the law suit had been filed in Virginia Beach Circuit Court but before the law suit was served.
3. By his letter dated March 13, 1997, Smallenberg contacted counsel for the executors of the estate, Stephen Test, seeking the removal of paragraph 14 from the second agreement. By his letter dated April 16, 1997 to Smallenberg, Test refused to remove the paragraph and informed Smallenberg that the executors would object to any further assignment of the second agreement or any rights conveyed under the second agreement.
If called to testify, Smallenberg would state that he wrote to Test on March 13, 1997 because he was concerned about the terms of the settlement and release agreement. Having not heard from Test prior to the date he believed the law suit needed to be filed and having been informed by Ayers that because the settlement and release agreement allowed property to be assigned and that a chose in action was intangible personal property, he signed off on the law suit as drafted.
4. Despite the warning from Test, the claim of legal malpractice against Deal and others was purportedly then assigned to Cardinal Holding Company, a corporate entity which was owned by Ayers.
If called to testify, Smallenberg would state that the warning from Test came after he had been told that a chose in action, as a property right, was assignable under the agreement and also after the law suit had been filed.
5. Smallenberg filed the law suit on or about March 21, 1997 in the Circuit Court for the City of Virginia Beach. The law suit was styled "T. Roy Jarrett and Harry W. Jarrett, Co-Executors of the Estate of Alvin Q. Jarrett, and Estate of Alvin Q. Jarrett, and Alvin Q. Jarrett, Deceased, and Cardinal Holding Company, assignee, plaintiffs v. John F. Deal Esquire, and Rhonda Cobler-Wells, Esquire, and John F. Deal & Associates, a Virginia partnership, et als." [law suit]. The law suit sought in excess of 24 million dollars from the defendants for legal malpractice.
6. Smallenberg included the executors of the estate of Alvin Q. Jarrett, the estate of Alvin Q. Jarrett, and Alvin Q. Jarrett, deceased, as plaintiffs in the law suit without any authority to do so. Smallenberg signed the motion for judgment as counsel for, inter alia, the executors of the estate of Alvin Q. Jarrett, the estate of Alvin Q. Jarrett and Alvin Q. Jarrett, deceased. However, neither Smallenberg nor the firm for which he worked had any authority to act as counsel for said persons and entities.
If called to testify, Smallenberg would state that his research as of the filing of the law suit indicated that an assignee had absolute right to bring suit in the name of its assignor.
7. By his letters dated May 1, 1998; May 11, 1998; and May 12, 1998, Test informed Smallenberg that independently he had obtained a copy of the law suit, that his clients, i.e., the executors of the estate of Alvin Q. Jarrett, the estate of Alvin Q. Jarrett and Alvin Q. Jarrett, deceased, were upset that suit had been filed in their names without any notice to them, that the style and caption of the suit should immediately be changed and that his clients had not consented in writing to the assignment of claims to Cardinal Holding Company as required by Paragraph 14 of the second agreement.
8. Smallenberg did not have the law suit served until March 20, 1998 because he knew of the history of ill will between Ayers and Deal.
9. The defendants responded to the law suit by filing on April 10, 1998 a grounds of defense, a demurrer and special plea in bar, a counterclaim against Cardinal Holding Company for malicious prosecution and a motion for sanctions. Paragraph 3 of the counterclaim included the following language:
[Cardinal Holding Company] filed the Suit with notice,
actual or constructive, that legal malpractice claims are
non-assignable in the Commonwealth of Virginia. [Car-
dinal Holding Company], as purported assignee, has no
basis in law to bring the Suit.
If called to testify, Smallenberg would state that at the time suit was filed, MNC v. Sickles had not been decided.
10. On June 4, 1998, Smallenberg filed a grounds of defense as counsel on behalf of Cardinal Holding Company in response to the counterclaim, inter alia, denying paragraph 3 of the counterclaim.
11. The circuit court subsequently entered an order of nonsuit on the motion of Cardinal Holding Company. The court reserved argument for a later date on the defendants' motion for sanctions.
12. On September 4, 1998, the circuit court awarded sanctions in accordance with Va. Code Section 8.01-271.1 in favor of the defendants against the firm and Smallenberg in the amount of $22,181.17 plus the sum of $10,000.00 to punish the firm and Smallenberg.
13. Smallenberg appealed the imposition of sanctions. On appeal Smallenberg argued, inter alia, that although legal malpractice actions were not assignable at common law in Virginia, it was reasonable for lawyers to believe that the common law in Virginia had been modified in 1977 by the enactment of the following provisions in Va. Code Section 8.01-26:
Only those causes of action for damage to real or
personal property, whether such damage be direct
or indirect, and causes of action ex contractu are
14. On November 5, 1999, the Supreme Court of Virginia affirmed the sanctions award in favor of the defendants and against the firm and Smallenberg. The Court stated that such a belief could not have been held after its decision in MNC Credit Corp. v. Sickels, 255 Va. 314 (1998), which was issued and made public on February 27, 1998, a month before Smallenberg had the law suit served. In MNC Credit, the Court held that Va. Code Section 8.01-26 "does not abrogate the common law rule which prohibits the assignment of legal malpractice claims in this Commonwealth because the General Assembly did not plainly manifest an intent to do so". 255 Va. at 318.
15. Furthermore, the Court noted that Smallenberg acknowledged to the circuit court that he had actual knowledge on April 13, 1998 of MNC Credit when served with the defendant's responsive pleadings which referred to MNC Credit.
16. However, almost two months later on or about June 4, 1998, Smallenberg filed the grounds of defense on behalf of Cardinal Holding Company to the counterclaim stating that it had a right to maintain the law suit based upon the purported assignment.
17. Smallenberg failed to make the reasonable inquiry required by Va. Code Section 8.01-271.1 prior to having the law suit served. Had he done so he would have known that the law suit on behalf of Cardinal Holding Company was not warranted by existing law.
18. Smallenberg knew or it was obvious that the law suit was brought by Ayers and/or the firm for the purpose of harassing or maliciously injuring Deal and the other defendants. Smallenberg knew or should have known that the law suit was brought after the applicable statute of limitations had run.
If called to testify, Smallenberg would state that he knew of no ill will between Ayers and Deal until after the law suit had been filed.
Such conduct on the part of the Respondent constitutes misconduct in violation of the following Disciplinary Rules of the Virginia Code of Professional Responsibility:
DR 6-101. Competence and Promptness.
(A) A lawyer shall undertake representation only in matters in which:
(1) The lawyer can act with competence and demonstrate the specific legal knowledge, skill, efficiency, and thoroughness in preparation employed in acceptable practice by lawyers undertaking similar matters, or
(2) The lawyer has associated with another lawyer who is competent in those matters.
DR 7-102. Representing a Client Within the Bounds of the Law.
(A) In his representation of a client, a lawyer shall not:
(1) File a suit, initiate criminal charges, assert a position, conduct a defense, delay a trial, or take other action on behalf of his client when he knows or when it is obvious that such action would serve merely to harass or maliciously injure another.
(2) Knowingly advance a claim or defense that is unwarranted under existing law, except that he may advance such claim or defense if it can be supported by good faith argument for an extension, modification, or reversal of existing law.
Accordingly, it is the decision of the subcommittee to impose upon the Respondent a Public Reprimand and the Respondent is hereby so reprimanded.
Third District, Section Two, Subcommittee
Of The Virginia State Bar
Cary A. Ralston
Secretary and Acting Chair
I certify that I have this day of January, 2002, mailed by CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, a true and correct copy of the Subcommittee
Determination (Public Reprimand) to Robert Henry Smallenberg, Respondent, at 7 South
Adams Street, Richmond, VA 23220-5601, his last address of record with the Virginia