Lawyer Charles Gallagher III, known for TV ads, now under fire

You've probably seen the TV ads — lawyer Charles Gallagher III perched on jagged rocks, warning that "navigating your way around court can be very rocky." Or standing on the beach by a huge sand castle, vowing to "defend your home and fight the bank" against foreclosure.

Three years ago, Leslie and Daniel Hughes turned to Gallagher for help in modifying the mortgages on their Tierra Verde home and a small motel they own in St. Pete Beach. Although neither property was in foreclosure, they say Gallagher told them to stop making payments because the banks would be more willing then to negotiate.

The couple agreed to pay Gallagher $6,618 in retainers, then $5,160 every month. But as the months passed with no modifications, they grew concerned. They thought they were being ripped off.

By the time the Hugheses and Gallagher parted company last year, they say they had paid him $88,000 — yet both mortgages were in foreclosure. They say he told them there was nothing more he could do and that they needed to hire another attorney — at an extra cost of nearly $17,000 — and declare bankruptcy.

Now the Hugheses are suing Gallagher for legal malpractice. Leslie Hughes has also filed a complaint with the Florida Bar that accuses him of charging "exorbitant fees'' and leaving them worse off than they were before they hired him.

The couple's experience highlights the sometimes gray area between "reasonable" and "excessive" legal fees — especially in the foreclosure defense cases that became so prevalent in the wake of the real estate bust.

To be admitted to the Florida Bar, lawyers must swear that they will not delay a case because of malice or greed. Yet the goal in fighting foreclosure is often to drag out a case long enough to get a modification or sell the house. Delaying, though, can run up the legal tab more than the client expected.

Gallagher, 42, one of Tampa Bay's best-known foreclosure defense lawyers, said he could not comment on the suit. According to his attorney, Jeffrey Goodis, Gallagher never told the couple to stop paying their mortgages but did "vigorously contest" the banks as shown by numerous motions, depositions and counterclaims over a year and a half.

"These are people who retained an attorney for a purpose, and the expectation is that you're going to pay your attorney," Goodis said. "They didn't pay the whole fee, but he kept them in the hotel and home, which is what he agreed to do."

The Hugheses don't dispute that they stopped paying Gallagher. But they say they did so only after it appeared he was more interested in getting money from them than he was in resolving their cases.

And while they still have their home and motel, along with mortgages now being restructured with the help of other lawyers, they say they owe almost $500,000 more than they did.

• • •

In 1999, the Hugheses moved from Pennsylvania to Florida and went into the motel business. They bought and sold a Treasure Island motel, then in 2004 assumed the mortgage on the Sundial Inn, an aging 22-room motel across the street from the beach near Blind Pass.

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Due to the sluggish economy, business had slowed enough by 2012 that the couple — he's 70, she's 53 — worried about whether they could keep paying their motel and home loans. They found Gallagher's name online and went to see him at his St. Petersburg office.

"He said, 'What we want you to do, if you're current on your mortgage, is to stop making your mortgage payments immediately,' " Leslie Hughes recalled. "We said, 'Why should we do that?' And he said, 'Because it will get (the banks') attention and then we'll sue them and negotiate for a lower payment.' Basically his words were, 'Don't pay them, pay me.' "

Hughes said her husband was reluctant to sign a contract, partly because he was wary of Gallagher's 68-year-old father, Chip, a nonlawyer who is the firm's executive director.

"He was kind of like a used car salesman, give a little wink and everything is going to be okay," Leslie Hughes said.

Nevertheless, in December 2012, the couple paid the retainers and agreed to pay Gallagher $1,800 twice a month to handle the motel loan and $780 twice a month for the home loan — a total of $5,160 every month, about half of what they had been making in mortgage payments.

Two months later, Cornerstone Community Bank began foreclosing on the motel loan. Court records show Gallagher countered with allegations common in foreclosure cases — the bank lacked standing to sue, it couldn't prove it owned the mortgage and note, some of the loan documents weren't properly signed.

At one point, Leslie Hughes said, she was driving when Chip Gallagher excitedly called to say that the bank had "screwed up" and that he had some paperwork she needed to immediately sign. They met at a convenience store.

"I'm leaning over my car hood (to sign the papers) and that's when Chip goes, 'You really have a nice a- -.' Then he made some remark like, 'Hey, you should stop over at my place sometime.' My jaw dropped."

In June 2013, Wells Fargo began foreclosing on the couple's home. With no loan modifications in sight, the Hughes­es consulted Matt Weidner, another foreclosure defense attorney.

"He was in utter disbelief" at Gallagher's fees, Leslie Hughes said, and told the couple they should ask for a breakdown of how he was earning their money. (In an interview with the Times, Weidner confirmed her account.)

Leslie Hughes emailed Gallagher. He responded:

Leslie: No such thing as an itemized bill exists. Our work is on a flat rate/fixed fee basis. The statements you received are the only bills that exist.

When the Hugheses stopped by Gallagher's office to say they had seen another lawyer who questioned his billing practices, Gallagher's father "went ballistic," Leslie Hughes said in her Bar complaint.

"His face became flaming red, he was screaming at the top of his lungs and raised his hand as if he was going to strike me. He was so enraged that his son-in-law, Jason Cox, and (his) son, Charles Gallagher, had to restrain him and keep him away from me."

As required by court procedure, the couple attended a mediation to try to work out a deal on the motel loan. But the couple sensed that Gallagher had so angered officials at Cornerstone that it had killed any chance of a settlement.

In a motion filed last April asking the Hugheses to pay Cornerstone's legal fees, the bank's attorney took an indirect slap at Gallagher.

"As a result of the defendants' dilatory tactics, this case has been pending since Feb. 20, 2013, with interest accruing daily at 18 percent on a loan exceeding $1 million and attorney fees needlessly multiplying with every day," lawyer William Lazenby wrote.

Gallagher fended off one attempt by the bank to have a receiver appointed to run the motel. But last June, just before the hearing on another attempt at receivership, the Hugheses say Gallagher called to tell them they needed to immediately declare bankruptcy.

"He had run out of ways to keep taking our money from us," Leslie Hughes said.

The couple were surprised to learn that Gallagher's firm doesn't handle bankruptcy cases and that they would have to hire a specialist, which cost them $16,717 in attorney and filing fees. Last June 24, they filed to reorganize the motel business under Chapter 11 of the federal bankruptcy code.

Under an agreement recently reached with the bank, the Hugheses now owe $1.43 million. Because of interest and other fees, that is almost $500,000 more than what they owed at the time they hired Gallagher.

Jeffrey Hakanson, the lawyer representing the couple in their malpractice suit, said Gallagher should have told them at the start that bankruptcy was their best option on the motel loan.

"If you go into Chapter 11, you can restructure your debt, which is what they were trying to do at the very beginning," he said. "Restructuring was the end game that should have been initiated at the beginning rather than pay (Gallagher) $88,000 to do nothing other than face ouster by the appointment of a receiver."

According to his lawyer, Gallagher discussed bankruptcy with the Hugheses. They say that he mentioned it only as a "last resort" and that they assumed his fees would cover a bankruptcy filing.

Gallagher's lawyer would not comment on allegations that his fees were excessive, saying that was "irrelevant" because the Hugheses agreed to pay them. Many defense attorneys, however, charge substantially lower amounts for home foreclosures.

Jon Coats, a St. Petersburg lawyer who has represented many homeowners, said he offers a choice: either a $500 retainer and a flat monthly fee of $300, or a $1,500 retainer that includes six hours of work — often enough to resolve a case through a loan modification or sale of the house.

Coats said he also keeps track of the exact amount of time he puts into each case.

The Florida Bar offers little guidance on attorneys' fees other than that they should not be "excessive." Bar rules say nothing about whether lawyers should keep time records when charging flat-rate fees.

However, "as a practical matter, it's hard defending yourself against excessive fees if you're not keeping track of your time," said Cynthia Booth, an assistant ethics counsel for the Bar.

Gallagher, a Stetson University College of Law graduate who began practicing in 2001, has been in trouble with the Bar. In 2010, he was admonished for threatening to sue a client for defamation unless she withdrew a Bar complaint she had filed against him in a fee dispute.

Gallagher's threat "was not only unprofessional, but also inappropriate and unethical," a Bar referee wrote.

In their malpractice suit, the Hugheses say Gallagher and his father "made threats of force or violence'' to coerce payment and "used vulgar or offensive language" when communicating with Leslie Hughes.

Goodis, the Gallaghers' attorney, called the allegations "untruths" that "reek of desperation." He acknowledged that there was "one meeting where I guess you could interpret it as raised voices." He said, however, that Chip Gallagher never raised his hand at Leslie Hughes or made inappropriate comments to her.

The Hugheses say business has been good of late at the Sundial. On a recent afternoon, several well-tanned guests were lounged around the small pool.

For a retainer of $2,000, the couple hired another attorney who has put them in touch with three banks about modifying the loan on their home. As with the motel mortgage, though, they expect years of accrued interest to swell the total amount they owe.

"We now realize that we had several options aside from allowing both our business as well as our home to go into foreclosure — but it is too late," Leslie Hughes wrote in her Bar complaint against Gallagher. "I think that it is unconscionable that a law firm would advise people to do something it realizes is not in their best interest, simply to collect money from them."

Contact Susan Taylor Martin at smartin@tampabay.com or (727) 893-8642. Follow @susanskate.