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Attorney suspended for practicing without a license, renegotiating fees

July 21, 2017

An Indianapolis attorney has been suspended for at least 180 days after he practiced law with a suspended license and modified fee agreements to work in his favor.

The case of In the Matter of: Douglas L. Krasnoff, 49S00-1508-DI-517, began in November 2001, when a client retained Douglas Krasnoff to represent him in a claim against his employer, General Motors Corp. The client signed a fee agreement that required him to pay Krasnoff $10,000 as a retainer/fixed fee, and also provided the client would pay Krasnoff 40 percent of any recovery as a “contingent fee bonus,” the retainer fee would be credited to the contingent fee bonus.  

The client paid Krasnoff $6,000, and the attorney then kept the entirety of a $3,000 settlement for himself, leaving the client with a $1,000 debt. Then, when the client hired Krasnoff to represent him in another case against GM in April 2002, he agreed to pay Krasnoff a $5,000 retainer fee and 33 to 40 percent of any recovery.

However, Krasnoff was suspended for CLE noncompliance the following month, and the U.S. District Court for the Southern District of Indiana imposed reciprocal discipline. Despite his suspensions, Krasnoff filed suit on behalf of his client in October 2002, then additional motions in the district court on Dec. 12, 2002. Krasnoff was reinstated in both jurisdictions on Dec. 31, 2002.

In addition to the fee agreements, Krasnoff also charged the client a $10,000 “appeal fee” and an $8,000 “additional fee” to add claims to his lawsuit, though the claims were never added. When the second GM case settled for $30,000, the client signed a settlement agreement allowing Krasnoff to take $20,000 in attorney fees, but the $5,000 retainer was not credited to him. Additionally, Krasnoff did not advise his client of the desirability of consulting with independent counsel before signing the fee modification.

Krasnoff’s client never received his $10,000, so he filed a grievance with the Indiana Supreme Court Disciplinary Commission. The commission then filed a verified two-count complaint against Krasnoff in August 2013, alleging misconduct when handling the client’s case and failure to cooperate with the commission’s investigation.

After both Krasnoff and the commission sought review of the hearing officer’s order, the Indiana Supreme Court found in a Thursday opinion that Krasnoff violated Indiana Professional Conduct Rule 5.5(a) for practicing law with a suspended license. Krasnoff was also found to be in violation of Rule 1.5(a) for charging an unreasonable “appeal” fee, as the purported “appeal” was actually an objection to a magistrate’s report.

The high court further found Krasnoff was in violation of Rule 1.8(a) for renegotiating the fee agreement to terms that were more advantageous to him without advising his client to consult with independent counsel. Finally, Krasnoff was found to have violated Rule 8.1(b) for his failure to timely respond to the commission’s demand for information and subpoena duces tecum, resulting in two show cause proceedings.

The high court cleared Krasnoff of a charged violation of Rule 1.5(c), which was based on his alleged failure to provide the client with a written statement showing the remittance due to the client and the method of its determination following the end of the second GM case. The justices said the commission failed to prove the charge by clear and convincing evidence.

As a sanction for his actions, Krasnoff has been suspended for at least 180 days, beginning Sept. 1, without automatic reinstatement. After the 180-day period, Krasnoff may petition for reinstatement pursuant to Admission and Discipline Rule 23(18). The costs of the proceeding are also assessed against him.

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