April 21, 2014

In winning landmark case, lawyer lost a lot

Theodore-Karavidas-LD2014,ph02
Ralph Greenslade
Theodore G. Karavidas spent years fighting attorney-disciplinary charges filed against him over the way he managed his father’s estate. The Illinois Supreme Court eventually took his side, forever changing the way such cases will be handled. But in the process, he lost his law practice, family relationships and his home.
By John Flynn Rooney
Law Bulletin staff writer

It’s February in the five-bedroom Glenview home Theodore G. Karavidas has lived in since 2001, and the Christmas tree is still up.

The artificial tree, along with much of the furniture, will need to be sold soon before Karavidas, his wife and three of his four children move from this 4,500-square-foot home to a 1,500-square-foot apartment.

He’s lost the property through foreclosure and is now in a personal bankruptcy proceeding.

“It’s a house I thought my kids would come back to visit from college,” he said. “I thought it would be the house my kids would ultimately get married in and bring grandchildren here.”

He talks about cherished memories of the place — his eyes welling up with tears, his voice quavering with emotion.

“Just the comfort and joy it provided to my children and wife,” he said. “Everyone could have their own space.”

A decade ago, Karavidas was a trial lawyer running his own firm in Chicago with two associates. In 1994, he obtained a $1.2 million settlement for a brain-injured client. One year, he made $600,000.

That all changed with attorney-discipline charges filed against him that took years to clear. He was unable to practice law full time while the allegations were pending, he said, leading to his family’s financial difficulties.

His fight went all the way to the Illinois Supreme Court, which in November dismissed the case against him in what some lawyers call the most significant attorney-discipline ruling in decades — one that potentially affects every attorney in the state.

After the high court ruled, the Attorney Registration & Disciplinary Commission’s administrator’s office started reviewing more than 100 pending and developing cases.

With the matter finally resolved, he just wants to get back to being a lawyer. He had to dissolve his firm in late 2007 as he lacked the money to fund the operation. He’s now of counsel at Williston, McGibbon & Kuehn in Barrington but hopes to more permanently catch on somewhere.

“I miss the intellectual rigors of practicing law full time,” Karavidas said. “I wish I had someplace to go to practice law instead of from my bedroom to my computer room.”

A long fight

The disciplinary case against Karavidas stems from allegations that he mishandled the estate of his deceased father.

As a youth and even after he became a practicing lawyer, Karavidas worked at his father’s business — Marie’s Pizza & Liquors in the Albany Park neighborhood.

Karavidas, 59, graduated from The John Marshall Law School in 1979. He worked as an assistant corporation counsel in Chicago, then as an Illinois assistant attorney general. He later opened his own firm, representing plaintiffs in personal-injury cases and other matters.

In 2000, Karavidas’ father, George, executed a will shortly before his death naming Theodore as independent executor of the estate worth about $700,000. His heirs were his wife, son and daughter.

In 2006, the daughter, Nadine, and her mother retained a lawyer because they were unhappy with Karavidas’ responses to their questions about the estate.

They asked a judge to remove Karavidas as executor of the estate two years later, according to court documents, after they learned he had tried to sell his father’s business despite a court barring him from doing so.

The disciplinary matter began in December 2006 when the ARDC administrator’s office sent Karavidas a letter outlining allegations forwarded by the lawyer for his sister and mother that he had misused money from his father’s estate.

ARDC lawyers told Karavidas if he resolved the litigation with his sister, the disciplinary matter would be dismissed, he said.

But the case dragged on.

In December 2009, the ARDC administrator’s office filed a public complaint against Karavidas alleging he converted $448,104 of estate assets and engaged in other misconduct.

Karavidas hired a lawyer to represent him, but by the time his case went before an ARDC hearing board, he could no longer afford one. As the April 2011 proceeding approached, he was representing himself.

He told a friend and lawyer, Kavathas & Castanes partner Samuel J. Kavathas Jr., about the disciplinary case. Kavathas had never handled a disciplinary matter before but offered to represent Karavidas pro bono.

At the hearing, Karavidas testified that his law firm sometimes had cash-flow difficulties, which led him to borrow money as lines of credit from the estate until he could resolve cases.

Evidence showed he never borrowed more than one-third of his share of the trust at one time. By October 2005, he had repaid the estate more than $448,000, he said.

The hearing board determined the ARDC administrator had proved Karavidas converted estate assets and breached his fiduciary duty to it. The panel recommended a four-month suspension of Karavidas’ law license but found he didn’t have a dishonest motive.

ARDC hearing board panels act as trial courts in the disciplinary process, while review boards functions as an appellate tribunal. The state Supreme Court has the final say in most attorney discipline cases.

Karavidas challenged the suspension recommendation before the review board — and won. The panel there recommended the disciplinary charges be dismissed because the case did not involve an attorney-client relationship or conduct that related to the Supreme Court’s Rules of Professional Conduct.

The administrator’s office appealed to the state high court, which accepted the case and heard oral arguments in May.

Before the Supreme Court hearing, Kavathas sought out advice from Thomas P. McGarry and Thomas P. Sukowicz, both Hinshaw & Culbertson LLP partners, as well as William J. Martin — attorneys who regularly defend lawyers in ARDC matters.

They told him he shouldn’t count on winning.

In his argument before the high court, Kavathas contended that George Karavidas left the money to his son to use as he saw fit. Karavidas allowed for much of the money in the estate to help his mother and sister, he said.

The only thing Karavidas was guilty of, Kavathas told the justices, was not funding the trust.

Six months later, the high court issued a 5-2 ruling in Karavidas’ favor, dismissing the charges against him.

“In sum, we hold that professional responsibility may be imposed only upon a showing by clear and convincing evidence that the respondent attorney has violated one or more of the Rules of Professional Conduct,” Chief Justice Rita B. Garman wrote in the majority opinion. “Mere bad behavior that does not violate one of the rules is insufficient.”

For every lawyer in Illinois, the ruling means the ARDC now can’t pursue disciplinary charges for actions that don’t involve an attorney-client relationship or where there is no ethics rules violation.

As a result, the ARDC administrator’s office must now be more specific in its allegations related to bad behavior by a lawyer who is not acting in an attorney-client capacity.

Kavathas didn’t set out to be the “poster child” that would change the way the ARDC levels charges, McGarry said. But that’s what the decision in his case made him.

“He just wanted to help a friend hold onto a good outcome in the disciplinary system,” McGarry said.

Regardless of how it impacts future defendants, Kavathas is just pleased to help Karavidas.

“It was satisfying to have my friend’s name cleared,” he said. “When the rules are on your side, you can win.”

Unintended history

ARDC Deputy Administrator James J. Grogan said the agency’s lawyers have reviewed more than 100 pending and developing cases in the wake of the Supreme Court’s decision.

The ARDC sought to “carefully tie allegations of misconduct to a specific rule violation,” he said.

ARDC hearing boards are dismissing allegations in disciplinary complaints involving conversion and breach of fiduciary duties based on the Karavidas decision.

Hearing and review board panels have also begun adding footnotes to decisions indicating that they aren’t recommending punishment for certain actions as a result of the ruling.

Mary T. Robinson, a partner at Robinson Law Group and a former ARDC administrator who now represents lawyers before the commission, called the Karavidas decision “procedurally … one of the most significant Supreme Court decisions in the history of the ARDC,” which opened in 1973.

“It really does change the way complaints are going to be pled,” she said. “It will require the administrator to commit with more precision to what conduct is alleged to violate the particular rule.”

Martin called the Karavidas opinion the most significant attorney-discipline case he’s aware of.

“It has changed the rules of the game in terms of what a lawyer may be disciplined for and what is necessary for the discipline to occur,” Martin said.

While Karavidas’ name might now become a common citation in attorney-discipline case law, he wishes he had never put himself in the position that started the case.

“If I had it to do over again, I would never have been the administrator of his estate,” he said. “I would have had someone independent do it. I am not a probate lawyer.”

Karavidas’ relationships with his mother and sister are still strained.

He’s now in the midst of a 15-month lease on the apartment where he lives with his wife and children.

But he’s dreaming of finding his way back to a more permanent lodging — and a law practice — someday.

“My hope is that we will be in a position to buy a house again,” he said. “But I don’t know if I can get there that quickly.”

 

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