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1998 MTWCC 29
WCC No. 9206-6487
JACK MURER, et al.
STATE COMPENSATION INSURANCE FUND
ORDER FOR CONTEMPT AND LIMITING USE OF
Summary: To allow counsel for claimants to assess the adequacy of efforts made by insurer to identify and pay claimants due benefits under Supreme Court decisions in this case, WCC ordered insurer to provide computer printouts identifying claimants who may be entitled to such benefits. Following letter from counsel for insurer, WCC inquired into whether claimant's counsel should be found in contempt of court for using the information to solicit plaintiffs for a bad faith action against the insurer. The Court also inquired into whether attorney had made misrepresentations to the Court during the Court's process of gathering information concerning the insurer's charges.
Held: Because the WCC had failed to order that claimant's counsel could not use the computer printouts as a means for contacting potential plaintiffs, counsel would not be held in contempt for that action. However, WCC was persuaded beyond any reasonable doubt that some statements made to the Court by counsel were a smokescreen to conceal counsel's real purpose in making contacts from the Court. Counsel found in contempt relating to those statements and is fined $500.
¶1 Following the latest Supreme Court decision in this case, Murer v. State Compensation Mut. Ins. Fund, 942 P.2d 69 (Mont. 1997) (Murer III), this Court assumed supervision over the State Compensation Insurance Fund's (State Fund) efforts to identify and pay those claimants due benefits under that decision and a prior decision in Murer v. State Compensation Mut. Ins. Fund, 267 Mont. 516, 885 P.2d 428 (1994) (Murer II). This Court has actively directed and monitored those efforts.
¶2 As a part of the Court's supervision, I directed the State Fund to furnish computer information to Mr. Allan M. McGarvey, petitioners' attorney, so he could assess the adequacy of the efforts and recommend improvements. As a result of the Court's direction, in late September 1997, the State Fund furnished Mr. McGarvey with computer printouts identifying claimants who may be entitled to Murer benefits. The printouts provided the addresses of the claimants and in many cases identified the amounts potentially due them.
¶3 On March 10, 1998, the Court received a copy of a letter from Mr. Bradley J. Luck, who represents the State Fund, to Mr. McGarvey. The letter set forth information indicating that Mr. McGarvey had used the computer lists provided pursuant to this Court's directive to solicit plaintiffs for a bad faith class action against the State Fund. Apparently, the action alleges that the State Fund has unreasonably delayed paying Murer benefits to many claimants entitled to those benefits.
¶4 On March 12, 1998, I issued an Order Regarding Confidentiality and Claimant Contact. In that Order, I forbade Mr. McGarvey from contacting claimants on the computer lists and ordered him to forward the lists, and any similar documents furnished by the State Fund, to the Court.
¶5 On March 23, 1998, I issued an Order to Show Cause. That Order directed Mr. McGarvey to show cause with respect to the following three issues:
¶6 After a telephone conference call with Mr. Luck and Mr. James H. Goetz, who represented Mr. McGarvey in the show cause proceeding, an Order Identifying Statements Which Are the Basis for the Contempt Proceeding was issued on April 3, 1998. The Order identified specific portions of two letters and transcript references to statements made by Mr. McGarvey in a March 20, 1998 hearing. The statements identified by the Court were to the effect that the State Fund had "voluntarily" provided Mr. McGarvey with the computer lists (March 18, 1998 letter at 1; Tr. of March 30, 1998 Hearing at 7:18-20), hence no restriction applied to their use, and that the calls had involved a "spot check" in connection with the present case (March 16 and 18, 1998 letters; Tr. of March 30, 1998 Hearing at 7:24-8:4, 12:17-13:22; 15:5-12; 17:23-18:13).
¶7 On April 8, 1998, a hearing was held in Helena. Mr. McGarvey was represented by Mr. Goetz, the State Fund by Mr. Luck. At the Court's direction, Mr. Luck subpoenaed six claimants contacted by Mr. McGarvey. Four of those claimants - Richard Matsko, Diane Hansen, Paul Batterman, and Garland Hall -- testified at the hearing. Mr. McGarvey also testified.
¶8 The information provided by Mr. McGarvey shows that by October 1997, he had decided to file a bad faith tort action against the State Fund arising out of its alleged failure to promptly identify and pay Murer benefits to all claimants due them. Meanwhile, he was involved in the process ordered by this Court to identify Murer claimants, send them written notice of an attorney fee hearing to be held on February 17, 1998, and ultimately pay the benefits due them. During a hearing held November 21, 1998, Mr. McGarvey agreed that the list of claimants compiled by the State Fund was adequate and was indeed over-inclusive. Notices of the February 17th hearing were then mailed, and the hearing was in fact conducted on February 17th.
¶9 Either before or after the February 17th hearing, Mr. McGarvey determined that the bad faith tort action against the State Fund should be filed by March 23, 1998, to avoid statute of limitations problems. (See Tr. March 20, 1998 Hearing at 4.) Using the September 1997 computer printouts furnished by the State Fund, in early March 1998, Mr. McGarvey put together three lists of claimants he intended to contact. (April 8, 1998 Hearing Ex. 3 at 9, 27 and 42.) He limited the list to claimants living in the Butte, Helena, and Great Falls areas because those were the venues he was considering for the new lawsuit. (McGarvey Test. at April 8, 1998 Hearing, and see Hearing Ex. 3 at 9, 27 and 42.) He further limited the list to those claimants who were, based on the computer printouts, due the highest amounts of Murer benefits. (April 8, 1998 Hearing Ex. 3 at 9, 27 and 42.)
¶10 On March 5 and 6, 1998, Mr. McGarvey talked to between eight and ten claimants on his lists. (McGarvey Test. at April 8, 1998 Hearing; Hearing Ex. 3.) Testimony from four of the claimants indicated that the focus of Mr. McGarvey's conversations with them was the new lawsuit.
¶11 Contempt of Court is governed by statute. Section 3-1-501, MCA, specifies the matters for which an individual may be held in contempt, as follows:
¶12 The paragraph implicated in this contempt proceeding is (1)(c), which provides that a "violation of duty by an attorney" is punishable as contempt. In Wyse v. District Court, 195 Mont. 434, 636 P.2d 865 (1981), the Supreme Court upheld a contempt judgment against an attorney who secured confidential information from court files and files of the county attorney, then disseminated the information in violation of a statute. Among the duties of an attorney are duties to comply with statutes and constitutional proscriptions against the dissemination of confidential information and to be truthful in representations made to the Court.
¶13 Contempt of court is a serious matter, especially when it involves an attorney. Attorneys are officers of the court. While they are duty bound to vigorously represent their clients, they must respect the limits of legitimate advocacy. Their advocacy must comply with statutes, the Montana and United States constitutions, professional rules of conduct, court rules and court orders. Attorneys must be forthright and truthful in their representations to the court. Anything less is unacceptable.
¶14 This case is not a class action; certification was requested but denied. Thus, Mr. McGarvey's representation in this case extends only to the named petitioners. However, the Supreme Court determined that because of the precedent established in this case Mr. McGarvey is entitled to attorney fees with respect to the benefits that the claimants not represented by him may receive. Mr. McGarvey has not passively accepted the fees. He has continued to advocate on behalf of unrepresented claimants. He has continued to press for full payment of Murer benefits to all claimants who are entitled to them. In disposing of the Order to Show Cause, I have considered Mr. McGarvey's unflagging advocacy on behalf of all claimants entitled to Murer benefits, and the fact that his view of his role as promoter of the rights of all claimants may have clouded his judgment in deciding to contact claimants identified in the computer lists.
¶15 In directing the State Fund to furnish Mr. McGarvey with its computer programs and the information generated by those programs, I expected that Mr. McGarvey would only use them in connection with this case. Specifically, I expected that the information would remain confidential and be used only to further the identification and payment of claimants entitled to Murer benefits. At hearing, Mr. McGarvey confirmed my own view that the information identifying claimants and their entitlement to benefits is protected by a right to privacy and is not generally publishable to the public. However, he viewed my directive to release the information to him as a license to contact claimants to sign them up as participants in a tort action against the State Fund.
¶16 This Court certainly never contemplated such use of the information. My purpose in ordering the disclosure was singularly limited to the identification and payment of Murer claimants. The context of my directive and Mr. McGarvey's acknowledgment of privacy concerns, should have put Mr. McGarvey on notice that the use of the information was limited to this case and was not a license to contact claimants to enlist them in a new lawsuit. On the other hand, Mr. McGarvey's advocacy on behalf of all claimants who may be entitled to Murer benefits - a role which this Court has implicitly and explicitly approved - may well have led him to believe that he was in effect representing all individuals injured between July 1, 1987 and June 30, 1991.
¶17 Unfortunately, the Court did not issue an order limiting the use of the information. In that regard, the Court is at fault. It cannot and will not hold Mr. McGarvey accountable in contempt for using the computer lists to contact claimants and solicit their participation in the new action.
¶18 Nonetheless, I am disturbed by the license that Mr. McGarvey took with the information. At hearing it was disclosed that the State Fund had previously resisted Mr. McGarvey's requests for information identifying Murer beneficiaries. In resisting the disclosure, it had specifically alleged that Mr. McGarvey would use the information to sign up plaintiffs in a new bad faith action. That resistance should have put Mr. McGarvey on notice that contacting claimants in connection with a new lawsuit was out of bounds.
¶19 But Mr. McGarvey took the opposite view. He interpreted the State Fund's failure to resist my directive for disclosure as acquiescence to his use of the information for any purpose which might promote the potential interests of Murer beneficiaries, including a tort action for bad faith. Thus, he interpreted the State Fund's willingness to comply with the Court's directive as acquiescence permitting him to contact claimants on the lists and line them up for the new legal action. His logic is tortured but not contemptuous.
¶20 After the Court was alerted to Mr. McGarvey's contacts, on March 16, 1998, Mr. McGarvey wrote a responsive letter to Mr. Luck. He copied the letter to the Court and I deem the copied letter as a direct representation to the Court. On March 18, 1998, Mr. McGarvey wrote a letter directed to the Court. Thereafter on March 20, 1998, a telephone conference call was held with the Court and State Fund counsel. The conference was requested by Mr. McGarvey for the purpose of clarifying whether he could name as plaintiffs any of the claimants he contacted from the list. During the conference he further responded to the allegations made in Mr. Luck's initial letter. A court reporter was present during the conference call and has transcribed the conversation.
¶21 The Court was troubled by two statements made and reiterated by Mr. McGarvey in the letters and conference. First, he stated that the information he used in contacting claimants was "voluntarily" disclosed by the State Fund and therefore not subject to any limitations. Second, he represented that one of his purposes in contacting claimants was to perform a "spot check" in connection with the ongoing process to identify, notify and pay Murer claimants.
¶22 In his March 18, 1998 letter to the Court, McGarvey said, among other things:
(April 8, 1998 Hearing Ex. 3; emphasis added). In the hearing of March 20, 1998, Mr. McGarvey again asserted that the lists had been voluntarily disclosed:
(Tr. March 20, 1998 Hearing at 7:14-20; emphasis added.)
¶23 At hearing Mr. McGarvey conceded that the Court had directed the State Fund to cooperate with him and furnish information which would allow him to verify that Murer claimants are identified and paid. Indeed, any other view flies in the face of the record of this case. At a hearing held on August 25, 1997, I made it clear to the State Fund that I expected it to provide Mr. McGarvey with computer information related to the identification of Murer claimants. (Tr. August 25, 1998 Hearing at 38:10-23, 39:1-3; 78:12-16; and passim.) On September 9, 1997, Mr. McGarvey wrote to Mr. Luck specifically asking for computer runs identifying Murer claimants. (April 8, 1998 Hearing Ex. 9.) The letter was copied to the Court. On September 26, 1997, Mr. Luck wrote to the Court indicating that the State Fund was cooperating with Mr. McGarvey and had scheduled a meeting with him in Missoula. The meeting was to include computer specialists from the State Fund. (April 8, 1998 Hearing Ex. 19.) On September 29, 1997, the State Fund forwarded to Mr. McGarvey the computer lists which are at issue in this proceeding. (April 8, 1998 Hearing Ex. 20.) On October 1, 1997, the Court wrote to Mr. McGarvey and Mr. Luck reiterating that State Fund should make full disclosure to Mr. McGarvey. I wrote:
(April 8, 1998 Hearing Ex. 21; emphasis added.)
¶24 At the April 8, 1998 show cause hearing, Mr. McGarvey urged that the disclosure of the lists was nonetheless voluntary because it appeared to him that the State Fund recognized that it was in trouble and was only too eager to provide the information. As in other instances, Mr. McGarvey's logic in this regard is tortured. I can only chalk his logic up to overzealous advocacy. Nonetheless, tortured logic is not contemptuous and, in any event, the Court was fully aware of what it had ordered and could not have been misled by the representation.
¶25 More troublesome than the two matters already addressed was Mr. McGarvey's assertion that in contacting claimants on March 5 and 6 he was doing a "spot check" in connection with this case.
¶26 The list of claimants he targeted to call was limited to claimants due the largest amounts of Murer benefits. All claimants targeted had amounts in excess of $1,000 due them, whereas many claimants on the list were recorded as due very small amounts or nothing at all. This led the Court to question whether spot check rationale advanced by Mr. McGarvey was in fact true or whether it was a subterfuge to justify his contacts with the claimants.
¶27 Moreover, the Court read, and still reads, Mr. McGarvey's statements concerning a spot check as representing that any discussion of the new legal action was merely incidental to the spot check. During the March 20, 1998 hearing, he stated:
(Tr. March 20, 1998 Hearing at 8:5-22.) In his March 16, 1998 letter to Mr. Luck, which was copied to the Court, Mr. McGarvey described the spot checks as follows:
(April 8, 1998 Hearing Ex. 2 at 2.) Later on in the letter, Mr. McGarvey further discussed the "spot checks," saying:
(April 8, 1998 Hearing Ex. 2 at 3; emphasis added.)
¶28 At hearing, Mr. McGarvey conceded that the primary purpose of his March 5-6, 1998 contacts was to solicit the claimants' participation in the new lawsuit. He testified that he intended to line up plaintiffs from Great Falls, Helena, and Butte because those were the venues he was considering for the new lawsuit. He agreed that he made no attempt to undertake a random sampling of claimants, rather he specifically targeted claimants who might aid his class action.
¶29 Mr. McGarvey made the contacts only two weeks prior to his deadline for filing the new action. He made the contacts after the notices regarding the attorney fee hearing had been sent out and the hearing had actually been held. If the sufficiency of the mailing was a legitimate concern to him, he would have made the inquiry prior to the hearing. Any "spot check" to check on the State Fund's prior efforts to notify claimants of benefits due them pursuant to Murer was superfluous to this case since the Court made it clear that all necessary measures will be taken to assure that all Murer claimants are identified and that they receive the payments due them.
¶30 Mr. McGarvey was also aware of a high rate of return of the notices sent out with respect to the February 17, 1998 hearing. On January 8, 1998, Mr. Luck wrote the Court and Mr. McGarvey a letter stating that "in excess of 2,400" of the notices had been returned as undeliverable. (Court File.) That was nearly one-third of the notices sent! Mr. McGarvey did not ask to review the returned notices to determine which ones had been returned. Nonetheless, based on one report by a claimant (Mr. Matsko) of not receiving a notice of the February 17th hearing, Mr. McGarvey recklessly asserted in the March 20, 1998 hearing that he had caught the State Fund "red-handed" in failing to mail the notices. He asserted:
(Tr. March 20, 1998 Hearing at 13-14.)
¶31 How could he have caught the State Fund red-handed when he didn't review the return notices? Mr. Matsko -- the claimant who did not receive notice -- testified that he had problems with his mail, including credit card bills he had not been receiving. Mr. McGarvey's disregard of the returned notices and his reckless misconduct charge against the State Fund is further evidence that his assertion that he was conducting a "spot check" was subterfuge and untrue.
¶32 Ultimately, I am persuaded beyond any reasonable doubt that Mr. McGarvey's statements concerning a spot check were concocted in an attempt to persuade the Court that in making the March 5 and 6, 1998 telephone calls he had a legitimate purpose connected with this case. His statements were simply a smokescreen to conceal the fact that his only purpose in contacting claimants on March 5 and 6, 1998, was to solicit claimants for his planned bad faith action against the State Fund. The statements were false. His representations concerning the spot check constitute contempt of court.
¶33 Mr. McGarvey's involvement in developing the methodology to identify Murer claimants and compute the amounts due them has been invaluable to the Court. I continue to view his involvement in the process as vital. Therefore, I am lifting my Order which precludes the State Fund from further disseminating information identifying and concerning Murer claimants. However, I am ordering that such information not be further disseminated by Mr. McGarvey and that it be used only for the purpose of assuring that Murer claimants are identified and properly paid.
¶34 1. Mr. McGarvey is in contempt of Court for falsely representing to the Court that one of his reasons for contacting claimants on March 5 and 6, 1998, was to conduct a "spot check" for purposes of this case.
¶35 2. Mr. McGarvey is fined, and shall pay to the clerk of the Workers' Compensation Court, the sum of $500 by May 1, 1998.
¶36 3. The State Fund shall resume and continue to supply Mr. McGarvey information relating to the ongoing process of identifying Murer claimants and calculating the benefits due them and the attorney fees due Mr. McGarvey.
¶37 4. If the State Fund doubts the need for Mr. McGarvey to have access to or possess any information, then it shall notify the Court and the Court will determine whether the specific information should be supplied.
¶38 5. Mr. McGarvey and his law firm are prohibited from further disseminating or publishing any identifying information concerning any Murer claimant other than the actual petitioners in this case and the claimants contacted on March 5 and 6, 1998, who have requested that he represent them.
¶39 6. Mr. McGarvey is prohibited from utilizing information gleaned about Murer claimants in this case in connection with any other case except to the extent that the information pertains to those claimants he actually represents or which duplicates information independently gathered through some other legal means. This certainly does not preclude any discovery that he might undertake in the bad faith action.
¶40 7. Mr. McGarvey is prohibited from contacting Murer claimants except those claimants he represents and those claimants whose identities are disclosed from information independently gathered through some other legal means.
¶41 8. At the conclusion of this proceeding, Mr. McGarvey shall return to the State Fund all copies of written materials forwarded to him by the State Fund in this process
DATED in Helena, Montana, this 16th day of April, 1998.
c: Mr. Allan M. McGarvey
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