Lawyer fights for his license in legal practice quagmire

In August 2008, just a couple of years out of law school, Jorge Sanchez launched what turned into a thriving Bankruptcy Court practice with hundreds of mostly Spanish-speaking clients.

At its height in 2009, the Sanchez Law Group, with its 12 employees, was taking on 42 new clients a month and incurring annual operating expenses of more than $600,000, Sanchez said in court documents this week.

But it all fell apart in March after Sanchez said he realized that he had acquired too many clients, too fast, and had hired some employees who weren't loyal to him.

Now, after suffering an emotional breakdown, the 33-year-old Sanchez, a 2006 Michigan State law school graduate, has lost it all and is fighting to keep his license to practice law in Nevada.

His management failings have left hundreds of clients, many of whom gave up their homes, without formal representation in Bankruptcy Court. Court officials are trying to find a way to protect his clients' rights and fix the legal mess Sanchez created.

"After 18 months of spectacular growth and success as a young attorney, I saw that everything had been undone," Sanchez wrote the court, while offering to help repair the damage he caused. "I had given everything for it and sacrificed my physical and mental health. I tried hiring more and more people -- attorneys and experienced paralegals. I fired those who were being deceitful.

"I am sincerely sorry for my decisions that have led us here today. If a way can be arranged for me to complete the outstanding files either myself or under the auspice of another attorney, I would do so."

Whether that can happen remains to be seen.

The Nevada Supreme Court issued an order last week temporarily suspending Sanchez's license.

The order prohibits him from practicing law in Nevada or accepting any money from his clients while the State Bar investigates allegations he misappropriated client funds.

The high court's order said Sanchez "failed to safekeep funds in potentially hundreds of cases" and poses a "substantial threat of serious harm to the public."

Sanchez has acknowledged in court papers that he filed 699 bankruptcy cases between Aug. 13, 2008, and March 1, while signing agreements calling for $1,500 to $2,500 in retainer fees for each case.

In Bankruptcy Court, Justice Department lawyers representing Acting U.S. Trustee Sara Kistler this week filed papers asking a judge to force Sanchez to reimburse as many as 480 clients who still have active cases.

"Many of the affected debtors do not possess the financial means to engage the services of substitute counsel, as they have already tendered payment of the so-called standard fee to Sanchez," the Justice Department lawyers wrote.

Brian Shapiro, a local bankruptcy trustee, said Las Vegas bankruptcy attorneys are coming together to help Sanchez's former clients in a "heart-warming" manner.

Some attorneys are representing the clients on a pro bono basis and others are offering them reduced fees, he said. Judges and trustees also have continued hearings to give the clients a chance to find new lawyers or obtain legal advice from public sources. Even Sanchez was seen in Bankruptcy Court this week.

The State Bar also is considering dipping into its special client security fund to provide the former clients with some financial relief.

Lisa McGrane, the bar's client protection manager, said in an affidavit that Sanchez's clients so far have filed claims totaling $81,688.

Exactly how Sanchez wound up losing his practice is being debated within the legal community.

Sanchez and his lawyer, Michael Warhola, could not be reached for comment.

But in his court papers this week, Sanchez acknowledged that after he was unable to handle his growing business, he turned to veteran attorney Joseph Scalia, who had a reputation for managing large case loads.

Scalia told the Las Vegas Review-Journal that he laid out a plan to get Sanchez's cases back on track.

"His practice wasn't running very efficiently, so I struck a deal with him to get him out of this quagmire," Scalia said. "A lot of people didn't speak English very well. They thought they were being taken advantage of."

In return for his help, Scalia said he was to receive outstanding legal fees from the cases he put back together, and Sanchez would come to work for Scalia.

For a few weeks, the arrangement remained in place -- until one weekend, while Scalia was out of town, Sanchez abruptly left the firm.

Sanchez wrote that the arrangement began to fall apart shortly after he moved into Scalia's office in March.

Clients became upset with the change in representation, and Scalia wasn't refunding money to some clients who demanded it, Sanchez said.

He added that he saw Scalia "verbally berate" some of the clients, which caused his mental state to deteriorate.

"I became very depressed and apprehensive because I had lost control of (Sanchez Law Group) and in my attempts to save the cases and keep everyone happy, I had now lost control of the cases, too, and I couldn't trust the last person I had turned to," Sanchez wrote.

Sanchez said he asked another attorney to help him remove his bankruptcy files from Scalia's office, but ended up in an altercation with other lawyers in the firm.

Police were called to keep the peace, Sanchez said, but he wasn't able to get his files.

Scalia countered that he had offered to give back the files, but Sanchez wouldn't take them.

After the office incident, Sanchez wrote, he "suffered an emotional crisis" and went to Miami to stay with relatives and seek medical treatment for "severe depression and anxiety."

Sanchez said he returned to Las Vegas a couple of weeks later refreshed and ready to resolve the complaints against him and rebuild his reputation.

But by that time, Scalia's firm was working on his cases.

Shortly after Sanchez returned, Scalia sent a letter to Bankruptcy Court informing the judges and trustees of his efforts to straighten out Sanchez's cases. Scalia also was in steady contact with the State Bar, which was investigating complaints against Sanchez and trying to help his clients.

"While this office is in its physical possession of many of Mr. Sanchez's files, we have not received any of the fees paid by his clients, nor have we been paid by Mr. Sanchez to service these files," Scalia wrote the Bankruptcy Court. "We are thereby limited in our ability to assist further in that we are not the attorney of record."

Scalia said his office had spent more than $50,000 trying to "stabilize" the cases. The office mailed more than 1,400 letters to Sanchez's clients advising them that it was assisting with their cases and fielded thousands of phone inquiries and complaints about Sanchez.

But in their court papers, Justice Department lawyers submitted an affidavit from one debtor, Maria Michelle Araque, who expressed unhappiness about the way she was treated by Scalia's firm.

Araque said she had paid Sanchez the rest of his $1,800 retainer on Feb. 8, only to discover weeks later that Scalia's firm had taken over the case.

The day before she and her husband were to meet with their creditors in Bankruptcy Court, Scalia's office told Araque that Scalia would not represent her at the meeting unless the couple signed an agreement to retain him for $1,500, Araque wrote.

"I told Mr. Scalia that we had already paid our fee in full and did not have the funds to pay anymore money," Araque explained. "Mr. Scalia became enraged and told me to get out of his office. He gave me our file and stated that he did not want to have anything to do with our case."

The couple ended up getting their creditor's hearing rescheduled and found a pro bono lawyer through the State Bar to represent them, Araque wrote.

Scalia said this week that what happened with Araque was an isolated case.

Earlier, he told the Bankruptcy Court in his letter that he was giving Sanchez's clients the "option" of entering into new agreements with his office.

"We have been reducing fees, granting people credit for sums already paid to Mr. Sanchez and generally attempting to resolve these cases as expeditiously as possible," Scalia wrote.

As that process continues, Sanchez, who insists he now understands what he did wrong, is hoping to "somehow" be a part of it.

"In light of the events that have transpired during the past few months," he wrote, "I am now attempting to maintain my professional licensure as an attorney and respectfully request that the court work with me to find a resolution that would provide a way for me to continue a legal career."

Contact Jeff German at jgerman@reviewjournal. com or 702-380-8135 or read more courts coverage at lvlegalnews.com.