ATTORNEY GRIEV. COMM'N OF MARYLAND v. Harlan

⁵⁷² RODOWSKY, Judge. This bar disciplinary matter concerns a disbursement by the Respondents for their client, out of funds recovered in a tort action, to a creditor of the client. Respondents requested, received and retained a “fee” of one-third of the disbursement, without the knowledge or consent of the client. The Attorney Grievance Commission filed charges against Joseph B. Harlan (Harlan) and Jac E. Knust (Knust), alleging violations of DR 1-102(A)(4), DR 2-106(A), DR 5-101(A), DR 5-107(A)(l) and DR 7-101(A)(l) and (3).

See former Maryland Rule 1230, Appendix F, Code of Professional Responsibility, which governed conduct prior to January 1, 1987. 1 We referred the charges to Judge ⁵⁷³ Leonard S. Jacobson of the Circuit Court for Baltimore County for hearing and report. Counsel for the parties furnished Judge Jacobson with a written stipulation of facts and also filed in the record for Judge Jacobson’s consideration the transcript of the hearing before the inquiry panel. See Maryland Rules, Ch. 1100, Subtitle BV, Rule BV6 d. The Respondents also produced seven character witnesses.

Judge Jacobson reported to this Court as his findings of fact the stipulation of facts filed with him by counsel. Based on those findings, Judge Jacobson concluded, as a matter of law, that Respondents violated DR 5-107 but that they had not committed any of the other violations charged. Respondents take no exception to the report. Bar Counsel excepts to the failure to find violation of Disciplinary Rules 2-106, 5-101 and 7-101.

Bar Counsel has not excepted to the failure to find a violation of DR 1-102. In setting forth the facts of this matter, we shall supplement material contained in the stipulation of counsel with additional facts from the transcript of proceedings before the inquiry panel. We do so because Respondents acknowledge that the transcript was provided to Judge Jacobson for his consideration. The stipulation of facts was apparently a courtesy to Judge Jacobson and not a limitation on the facts available for his consideration and for our review.

Further, Judge Jacobson had no opportunity to evaluate the demean- or and credibility of fact witnesses. Respondents’ client was Frank Getson (Getson). Get-son’s formal education ended during the tenth grade. He was forty years old in March 1989, at the time of the inquiry panel hearing.

Perhaps a decade earlier Getson had been employed by an importer of foreign motor vehicles in the port of Baltimore. While driving one of his employer’s vehicles, in order to move it from one location to another on a large, open-air, storage area or parking lot, Getson collided with another vehicle owned by his employer and operated ⁵⁷⁴ by his co-employee, Rose Robinette (Robinette). The arrangement of the lanes on the storage lot was such that Robinette was traveling on the “boulevard” and Getson was traveling on the “unfavored street.” Getson has consistently maintained, almost to the point of fixation, that the accident was Robinette’s fault. He maintains that his speed was approximately fifteen miles per hour, and that Robinette hit him while she was traveling about sixty miles per hour.

The employer’s workers’ compensation carrier, Hartford Accident & Indemnity Company (Hartford), paid Robinette a substantial amount in workers’ compensation. Robinette then sued Getson for damages for injuries sustained in the motor vehicle accident. Robinette’s attorney was William J. Blondell, Jr., Esq. (Blondell).

Md.Code (1957, 1985 Repl. Vol.), Art. 101, § 58 in general requires a worker to reimburse the insurer, out of any recovery in a third party action, the workers’ compensation paid to the worker. The parties have referred to Hartford’s interest in any recovery by Robinette from Getson as the compensation “lien” or as Hartford’s subrogation interest. It appears that Hartford did not employ its own counsel, in addition to Robinette’s counsel, Blondell, to protect its subrogation interest in the action against Getson.

Thus, Blondell would ordinarily be entitled to a fee from Hartford, based on the amount recovered by Hartford in Robinette’s (and Hartford’s) action against Getson. See Collins v. United Pacific Ins. Co., 315 Md. 141 , 553 A.2d 707 (1989). Getson had no automobile liability insurance.

He engaged William Littleton, Esq. to represent him but a default judgment was entered against Getson. After an inquisition, which Getson apparently attended unrepresented, damages were fixed at $73,000. Getson thereafter, on the recommendation of his then wife, consulted with Knust. At that time, and until January 1, 1985, Knust practiced in partnership with Harlan.

Knust maintained an office in Ellicott City, while Harlan maintained an office in Baltimore City. Respondents under ⁵⁷⁵ took to represent Getson in a claim against Littleton for legal malpractice. A written retainer and fee agreement, dated January 21, 1983, was executed. It provided for a contingent fee of fifty percent, apparently to be calculated on the gross recovery. 2 The action against Littleton required proving that he had failed competently to represent Getson and that, had the duty been performed competently, the result of the Robinette case would have been favorable to Getson.

At some time in 1984 a representative of Hartford, Sandy Kelly, learned, quite possibly from Blondell, that Knust was representing Getson. She telephoned Knust, authorized Respondents to protect Hartford’s interest, and authorized an attorney’s fee to Respondents with respect to any sums recovered. Knust replied that he would have to discuss the proposal with Harlan. Knust sent Harlan a memorandum describing the conversation, but Respondents did not then accept the proposal.

Nor did they discuss it until after Getson’s action against Littleton produced a recovery. Harlan became more active in representing Getson as discovery was undertaken, and he was clearly lead counsel. Hartford had conducted an investigation of the Robinette-Getson accident, and Harlan obtained from Hartford the report of that investigation. The stipulation says that “Hartford’s investigative report was crucial to the success of Mr. Getson’s claim against Mr. Littleton,” but it does not explain how the report was “crucial.” 3 ⁵⁷⁶ Sometime in the fall of 1985, Getson’s action against Littleton was tried to a jury presided over by Judge Joseph F. Murphy, Jr. in the Circuit Court for Baltimore County.

Judge Murphy, testifying for the Respondents in this disciplinary proceeding before Judge Jacobson, said that the action against Littleton “was a difficult case for [Getson] because [Littleton] raised two defenses, one, he was only hired to enter his appearance, and the understanding with [Getson] was that [Littleton] would do nothing else and [Getson] would get somebody else involved in the case, and, second, that if Clarence Darrow had come back from the dead to try the case [of Robinette v. Getson] the results would have been the same.” The jury returned a verdict in favor of Getson against Littleton for $150,000. The highest offer had been $10,000. There were post judgment motions which were denied. There was no appeal.

Respondents fully expected that Blondell, as counsel for Robinette (and necessarily Hartford), would lay a garnishment in their hands to seize funds received from Littleton’s legal malpractice carrier in satisfaction of the judgment. Respondents caused an associate attorney in their firm to research whether a garnishment would be limited to the net recovery after their fee and expenses. The garnishment was not laid until January 22, 1986. On January 15, 1986, Respondents made distribution to Getson as set forth on a settlement sheet, a copy of which is attached as Appendix A to this opinion.

The meeting lasted approximately two hours. Getson attended with his then wife whom Respondents describe, as more sophisticated than Getson. She assisted in explaining the distribution ⁵⁷⁷ and options to Getson. 4 Respondents explained to Getson that the Robinette judgment was outstanding against him and that they anticipated that Getson would be pursued for collection of it. Getson adamantly refused to permit any portion of the recovery to be disbursed to Robinette whom he insisted was responsible for the accident.

In the settlement sheet Getson authorized Respondents “to pay to [Hartford] the sum of $52,588.85 representing the full amount of the workmen’s compensation lien in the case of Robinette v. Getson.” 5 The settlement sheet further recites that Getson “had authorized this because of the necessity for the assistance and appearance during trial of [Hartford’s] agents and employees which acts of cooperation were necessary to the successful prosecution of [Getson’s] case against Mr. Littleton.” 6 ⁵⁷⁸ By letter dated January 20, 1986, Harlan wrote to a Mr. Rich at Hartford. The first paragraph of that letter includes the following: “Pursuant to the agreement made between Jac Knust, formerly of our office.” 7 Harlan acknowledged that the reference to an agreement relates to the telephone contact by Hartford in 1984. He said that his characterization of the legal relationship was mistaken because Hartford’s offer of employment had never been accepted. . In the letter Harlan advised Hartford that he was authorized to pay the subrogation interest in the Robinette judgment in full, and he suggested a one-third “fee” ($17,529.62) to Respondents.

The mechanics of the disbursement were to enclose to Hartford a check for $35,059.23 (two-thirds of $52,588.85), by the acceptance of which Hartford would agree to the one-third “fee.” This cleared two-thirds of Getson’s balance out of the Respondents’ escrow account and protected at least that much from the anticipated garnishment. 8 Each of the Respondents admits that Getson knew nothing of the “fee” from Hartford. Harlan testified that his thinking at the time was that the “fee” from Hartford “wouldn’t have made any difference to [Getson] one way or the other.” Harlan “didn’t think that there was any harm to Mr. Getson as to whether or not we were able to get $1.00, no dollar, seventeen thousand dollars ($17,000.00). It didn’t affect him in any way, shape or form.” Harlan discussed the proposed “fee” from Hartford with Knust. Knust guesses that he and Harlan “were thinking it was our efforts that produced the result here____” ⁵⁷⁹ Getson first learned from Blondell, or one of Blondell’s associates, that Hartford had paid a “fee” to Respondents.

Getson “felt bad about it,” but “[n]ot really [angry].” He “just felt — oh, these lawyers.” When Getson learned of the fee, he telephoned Knust who, according to Getson, told Getson that Respondents “knew at the time, but they didn’t feel that I should have known about it, whatever.” Blondell enforced the Robinette judgment against Getson by garnishing Getson’s wages. Getson again consulted Knust. Knust, for a $750 fee, placed Getson in bankruptcy. Blondell, in his own name, sued Respondents for the money paid by Hartford, but that case was dismissed on .motion.

Then, Robinette, represented by Blondell, sued Respondents on the theory that she was a third party beneficiary of the contract between Respondents and Get-son relating to prosecution of Getson’s claim against Little-ton. That action resulted in a jury verdict in favor of the Respondents. In the actions brought by or through Blondell, Respondents were represented by an associate in Harlan’s new law firm, Joseph F. Zauner, III (Zauner). Zauner also represented Respondents before the inquiry panel.

Zauner immediately analyzed the matter correctly and advised Respondents that the $17,000 was Getson’s money which should be refunded to him. 9 Harlan acknowledged that “it took [him] a while” to recognize that the money should be paid to Getson. He said: “I had some discussions with other people that were attorneys, as to the philosophy of whether that was correct or not because, the way that it happened, I thought that we were doing the right thing and, retrospectively, I lost the argument. They said, ‘Hey, just look at it from the other perspective.’ ” ⁵⁸⁰ The $17,000 was tendered to Getson’s trustee in bankruptcy and was eventually accepted. Getson never complained to Bar Counsel.

The instant matter was precipitated by Blondell’s complaint. Bar Counsel’s investigation initially focused on Respondents’ duties, vis-a-vis, Blondell, and eventually the focus of the investigation turned to Respondents’ relationship with Getson. . The inquiry