An American University law professor defended himself in a two-day disciplinary hearing last week against charges that he sold out his clients in an aborted class action.

Last June, the D.C. Office of Bar Coun-sel, which prosecutes ethics cases here, accused Mark Hager, a tenured professor at the Washington College of Law, with 11 violations of the D.C. Rules of Professional Conduct.

The case, which apparently raises novel ethics issues under the D.C. rules, stems from a confidential deal-which included $225,000 in attorney fees-that Hager and his Boston co-counsel reached in 1997 with the Warner-Lambert Co., the pharmaceuti-cal giant that was the target of their clients' complaints.

It is undisputed that Hager achieved for his clients the full relief that they could have won in court. Bar counsel's primary charge, however, is that Hager violated ethics rules by resolving the matter, before a complaint was filed, without informing his clients.

At last week's hearing before a three--person committee of the D.C. Board on Professional Responsibility, it appeared that the outcome of the ethics case was likely to turn on the arcane issue of whether the deal struck between Hager and Warner-Lambert lawyers was a "settlement agreement."

Senior Assistant Bar Counsel Elizabeth Herman, prosecuting Hager, argued at the hearing that Hager violated ethics rules by entering into the agreement-which includ-ed refunds, a money-back guarantee on the product, and a pledge by Hager not to sue the company- without his clients' con-sent. She also charged that it was dishonest of Hager to withhold informa-tion from his clients when they inquired about the agreement.

Hager's lawyer, Mark Foster, told the panel that his client couldn't have done anything wrong because there are no rules against the actions he undertook.

"I argue that there is no rule that applies in this situation," said Foster, a former board chairman who is now a partner at D.C.'s Zuckerman, Spaeder, Goldstein, Taylor & Kolker. "These are uncharted waters."

If that assessment proves correct, the bar might act to rec-tify the situation.

"If as a result of this proceeding it appears that there is some gap in the rules, we have a committee whose job it is exclu-sively to think about changes to the rules and recommend changes to the bar," says Daniel Joseph, chairman of the Rules of Professional Conduct Review Committee of the D.C. Bar and a partner at Akin, Gump, Strauss, Hauer & Feld. Joseph declines to comment on the specifics of Hager's case.

And tort reformers seize the case as another example of overreaching by lawyers at the expense of their clients.

"The absence of disclosure by the attor-ney breaks down the one-on-one relation-ship of the client and the lawyer, and increases the imbalance of power," says Victor Schwartz, a partner at Crowell & Moring who is also general counsel of the American Tort Reform Association.

REPERCUSSIONS UNCLEAR

If the committee finds that Hager did vio-late ethics rules, the sanctions would almost certainly not reach the level of suspension, given Hager's clean record. Instead, repri-mand or public censure is the more likely penalty.

It also is unclear what repercussions, if any, Hager might face at AU. "The Washington College of Law places highest importance on issues of ethical and professional responsibility," says law school spokesperson Kathy Eterttad. "Because it's a pending matter before the disciplinary board, it would be inappropriate to com-ment at this time:" But at other law schools, bar discipline against a faculty member often results in an internal proceeding to decide whether the school should also take action against the professor.

The matter has its roots in early 1997, ' when Erika Littlewood, a Richmond, Va., resident and an acquaintance of Hager's, asked him to look into filing suit over the alleged ineffectiveness of NIX, Warner--Lambert's anti-lice shampoo.

NIX was advertised as "99 percent effec-tive," but Littlewood found that it had failed to eradicate lice contracted by her children.

After learning of studies that identified strains of lice that are resistant to per-methrin, the pesticide found in NIX, Littlewood called Warner-Lambert. The company allegedly dismissed the possibility of permethrin-resistant lice and advised her that the chemical's effectiveness might be compromised by using certain hair condi-tioners or swimming in chlorinated water—-information not included in the product packaging.

Littlewood asked the company to include more complete information in the packag-ing, but Warner-Lambert declined, offering to refund her money. Without receipts, how-ever, she could only claim a fraction of the money she'd spent on NIX.

Hager, who has maintained a mostly pro bono, part-time practice since joining AU's faculty in 1988 as a professor of constitu-tional law and torts, told Littlewood that he would be interested in pursuing a class action against Warner-Lambert. Hager testi-fied that he had never handled a class action before.

Littlewood, Hager, and Boston solo prac-titioner John Trafficonte, a classmate of Hager's at Harvard Law School, then set about to find the 100 plaintiffs they would need to qualify for class certification.

Sixty consumers signed a contingent fee agreement that stated, "The attorneys will investigate potential bases for a class action ... seeking refund of the purchase price, and other damages, based on certain claims, including breach of warranty:" The agreement also states that attorney fees may be paid "directly by the defendants to the attorneys:"

By July, there still were not enough plaintiffs to seek certification as a class, and the lawyers were becoming concerned.

"We never imagined that it would be so difficult and take so long," Hager testified at the hearing.

The attorneys also were worried that they lacked the requisite scientific background to succeed in the case.

"For every product failure, there are three or four factual explanations," Hager testi-fied. "Because the other explanations are always out there, we were afraid of not get-ting [certified] on a factual basis."

What's more, there was the possibility that the suit would be dismissed even if the court did certify the class. Under the Magnuson-Moss Act, which Hager and Trafficonte planned to invoke, Warner-Lambert would have the right to "cure" the dispute by issuing refunds to the plaintiffs, thus ending the case.

By July 1997, the company had already removed the claim of 99 percent effective-ness from the NIX box. At about the same time, Hager testified, Warner-Lambert found out that a suit was brewing, and com-pany counsel Karel Zaruba contacted Traf-ficonte to see if there was a way to resolve the matter before litigation.

On Aug. 8, Hager and Trafficonte reached the deal with Warner-Lambert that became the focus of the ethics case.

In the resolution, entitled "Settlement Agreement," Warner-Lambert granted unlimitPd refunds for the lawyers' 90 clients, agreed to create a scientific panel to investigate pesticide-resistant lice, offered a money-back guarantee to future purchasers of NIX, and agreed to pay Hager and Trafficonte $225,000 in fees. In return, the lawyers agreed not to sue Warner-Lambert and not to divulge the fact or the amount of the attorney fees to anyone-including their clients, Hager testified.

90 NAMES

Hager and Trafficonte furnished Warner--Lambert with the names of the 90 would-be plaintiffs, while insisting that they retained the right to sue if the company reneged on the bargain.

The lawyers then sent a letter to each of their clients outlining the basic elements of the agreement, omitting the fact that they had been paid the $225,000.

"Without the confidentiality, we would not have had a resolution," Hager testified. "We wanted to answer that question. We were obligated not to answer that question."

Hager also testified that while negotiat-ing the deal, he informed Littlewood of the agreement's basic terms, and that she was not satisfied with Warner-Lambert's concessions.

The next day, she withdrew from the class and requested the list of 90 names. Hager refused but offered to pay her for the time she had invested in creating a web-site for the case.

Debra Duke, a friend of Littlewood's and one of the potential plaintiffs, says that when Hager offered so readily to pay Littlewood, she began to think something was wrong.

Duke confronted Hager and Trafficonte with her concerns, but they would not reveal anything about their fees. In Decem-ber 1997, she filed complaints against both lawyers with their respective bar associa-tions.

“In the beginning," Duke says, "Hager said he thought this could be the suit of the century."

But as the case progressed, Duke believes, the attorneys found the hurdles too high.

"My belief is that John and Mark did not have the resources to fight that kind of a battle," says Duke. "When John was ap-proached by Warner-Lambert, I think they set aside our needs to make some money off the company."

'A SECRET DEAL'

Senior Assistant Bar Counsel Herman stated at the hearing that the agreement Hager and Trafficonte signed with Warner--Lambert was not just a settlement, but "a secret deal" with tragic results.

"The client lost trust in her attorney. Lost trust in the system. And lost momentum to go forward," Herman said.

But even if that is true, it is not clear whether the lawyers' deal violated any rules.

Hager is charged with three violations of the ethics rules that rely on the definition of "settlement": Rule 1.2 (a), failing to abide by his clients' decisions concerning the set-tlement of a matter; Rule 1.4 (c), failing to inform his clients of an offer of settlement; and Rule 5.6, participating in offering or making an agreement in which a restriction on his right to practice was part of the set-tlement of a controversy between parties.

If a settlement is defined simply as an agreement that ceases hostilities before the end of litigation, Hager's conduct may have violated the rules.

But Foster, Hager's lawyer, offered a nar-rower definition of the term. "Normally, a settlement is a contract or an agreement between a plaintiff and the defendant. There is no agreement between the plaintiff and the defen-dant here," he says. Rather, the settlement involved only Hager, his co-coun-sel, and Warner-Lambert.

Bar counsel also accuses Hager of crafting the deal without his clients' consent or con-sultation, and of disre-garding their right to know about the fees he received. The petition also asserts that his silence on the fee matter amounted to dishonesty.

Foster maintains that the contingent fee agree-ment rebuts any charge that the attorneys received compensation from a third party without their clients' consent.

But bar authorities are not the only ones skeptical of Hager's defense.

"The argument that this wasn't a settle-ment is certainly novel," says Joseph Mayer, president and general counsel of the Copper & Brass Fabricators' Council, Inc.

Mayer, who formerly served as assistant bar counsel and executive attorney for the Board on Professional Responsibility, also notes, "You can put anything you want in a contingency fee agreement. That doesn't mean it passes muster."

And advocates of legal reform say what happened in the NIX case is yet another example of the problems endemic in the legal arena.

"Just because you don't want to go for-ward with the case if you don't have enough people it doesn't mean you can go sell the case," says James C. Turner, executive director of HALT-An Organization of Americans for Legal Reform.

"The overriding ethical principle is that you owe your loyalty to your clients.”

Final disposition of Hager's case is not expected for several months.