Attorney Grievance Commission v. Chapman

McDONALD, J., concurring. I have no quarrel with the judgment rendered by the Court.' I do differ, however, with the Court’s ruling on one of the exceptions, which does not affect the disposition of the case. Many homeowners caught up in the recent foreclosure crisis have sought assistance in negotiating a modification of their mortgage to avoid foreclosure for the ultimate benefit of both the homeowner and the lender. Attorneys may provide such assistance.

Examples can be found in the Foreclosure Prevention Project endorsed by this Court, which provides in ²⁷⁹ struction to attorneys in loan modification, among other things. See http://probonomd.org/about-us/104-foreclosureprevention-pro-bono-project. But attorneys are not the exclusive providers of such assistance. 1 Many homeowners who could benefit from such assistance cannot afford to pay the typical fees charged by attorneys but also do not qualify for free legal services; not all can be accommodated by the Foreclosure Prevention Project. According to the findings of the hearing judge, Mr. Chapman was apparently trying to develop a practice that would meet this need in a way that he apparently believed would comply with the relevant law.

Although he was able to achieve favorable outcomes for many clients, he failed to comply with certain provisions of the Maryland Lawyers’ Rules of Professional Conduct. One of the alleged violations was based on Rule 1.5(a), which concerns the reasonableness of fees and expenses charged by an attorney. In the case of Ms. Bogarosh, the client agreement revealed that Mr. Chapman would be retaining a consultant to assist with the loan modification efforts, and that a portion of the client’s payment would be used to pay that expense. And it was undisputed that loan modification efforts were actually undertaken on behalf of Ms. Bogarosh, although they proved unsuccessful, in part due to miscommunication.

The hearing judge concluded that Mr. Chapman did not violate Rule 1.5(a) because “[t]he fees charged are not unreasonable, based upon the nature of the work that was anticipated at the time the fee was set. Similarly, they were not unreasonable in light of the efforts undertaken ...” Although this was one of the hearing judge’s conclusions of law, it was very much bound up in the particular facts of the case. In this context, I would defer to the judgment of the hearing judge and overrule the exception. . Less scrupulous providers have engaged in abuses that prompted the Legislature to enact various protections for homeowners.

See Chapters 5, 6, Laws of Maryland 2008; Chapter 509, Laws of Maryland 2005. BATTAGLIA, J. Gerald Frederick Chapman, Respondent, was admitted to the Bar of this Court on May 24, 1979. On October 25, 2011, the Attorney Grievance Commission (“Bar Counsel”), acting pursuant to Maryland Rule leATilla), 1 filed a “Petition for Disciplinary or Remedial Action” against Chapman, which incorporated two separate complaints filed by Ms. Barbara Bogarosh and Mr. John Butler. The factual bases of these charges arose out of Chapman’s consulting agreement with James Weiskerger to perform loan-modification work through Chapman’s law firm, Chapman Law Group, LLC.

Through this arrangement, Bar Counsel alleged, Chapman cloaked JW Capital, Mr. Weiskerger’s loan-modification business, with the authority of Chapman’s law firm. Further, Bar Counsel alleged that Chapman’s conduct “operated to misrepresent and ²⁴¹ mislead clients into believing they engaged the services of a law firm, rather than an unlicenced foreclosure consultant.” Chapman was charged with violations of the Maryland Lawyers’ Rules of Professional Conduct, Rules 1.1 (Competence), 2 1.2 (Scope of Representation), 3 1.3 (Diligence), 4 1.4 (Communication), 5 1.5 (Fees), 6 1.15 (Safekeeping Property), 7 5.3 (Re ²⁴⁴ sponsibility Regarding Nonlawyer Assistants), 8 5.4 (Profes ²⁴⁵ sional Independence of a Lawyer), 9 5.5 (Unauthorized Practice of Law), 10 and 8.4 (Misconduct).11 ²⁴⁷ Pursuant to Rule 16-757, 12 in an order dated October 20, 2011, we referred the petition to Judge Kathleen Gallogly Cox ²⁴⁸ of the Circuit Court for Baltimore County for a hearing. 13 Judge Cox heard testimony from Ms. Bogarosh, Mr. Butler, and Chapman himself, and, thereafter, issued the following Memorandum Opinion, in which she determined that Chapman violated Rules 1.4, 5.3, 5.4, 14 and 8.4, but did not violate Rules 1.1,1.3,1.5,1.15, and 5.5: Memorandum Opinion This matter came before the Court for hearing on April 23, 2012, on the Petition for Disciplinary Action filed against Gerald F. Chapman. The Court has considered the testimony and evidence presented, together with post-trial submissions and arguments of Mr. Chapman and the Attorney ²⁴⁹ Grievance Commission. Pursuant to Maryland Rule 16-757, the Court makes the following findings of fact and conclusions of law.

I. Findings of Fact The facts giving rise to this Petition all stem from a consulting arrangement between the Respondent, Gerald F. Chapman, and JW Capital to do loan modification work. The only testimony concerning the law firm structure and the implementation of that consulting relationship came from Mr. Chapman himself. The only other testimony produced at the hearing was from two clients who filed complaints regarding services they received, as supplemented by Mr. Chapman’s files concerning those representations. Given the evidence presented, the factual background giving rise to the Petition is really not in dispute.

A. Facts Pertaining to Mr. Chapman’s Legal Practice The Respondent, Gerald F. Chapman, graduated from the University of Baltimore School of Law and was admitted to practice law in Maryland in 1978. Mr. Chapman has not been the subject of any prior disciplinary proceedings. Throughout the early phases of his career, Mr. Chapman worked in the banking industry. He worked prior to law school as a bank examiner.

Following his admission to practice, Mr. Chapman became an enforcement attorney with the Federal Home Loan Bank Board (“the FHLBB”), which regulates thrift institutions. He served as the deputy director of enforcement for the FHLBB from 1981 through 1985, when he left to become the vice president of Vista Federal Bank in Reston, Virginia. Mr. Chapman left that position to become the president of City National Bank in Washington, D.C. in 1992. Thus he had extensive experience within the banking industry before entering private practice.

Mr. Chapman joined the law firm of Cooter, Mangold, Tompert & Chapman, LLC in 1993 as a partner in their commercial litigation practice. He remained with that firm until 1998, doing primarily commercial litigation and some ²⁵⁰ transactional real estate and corporate work. In 1998, Mr. Chapman became a solo practitioner, operating as the Chapman Law Group LLC (“the Firm”). The majority of his practice involves commercial real estate transactions, particularly the purchase, sales, and leases for shopping centers and other commercial parcels, with some associated litigation practice.

In approximately 2007 or 2008, following the dramatic decrease in commercial real estate work, Mr. Chapman’s practice expanded to include loan modification work that was initially referred to him through existing clients. In contrast to his prior commercial practice, this work was mostly residential. The loan modification work increased, as residential defaults “skyrocketed” in the 2008-2009 time frame. In Mr. Chapman’s experience, lenders were inundated with modification requests, and navigating the process was a challenge.

He noted that lenders were “understaffed, overworked, and started to compartmentalize.” It was particularly difficult to deal with the same person within a bank, or to get a consistent approach or a response to a modification request. Around 2008, Mr. Chapman became acquainted with James Weiskerger, who was also regularly involved in loan modification work. Mr. Weiskerger is not a lawyer. Mr. Chapman indicated he believed Mr. Weiskerger had a good reputation in the loan modification field.

Following several meetings and discussions concerning mutual business opportunities, the two agreed to enter into a consultant agreement. Mr. Chapman testified that he did not consider loan modification work to be legal work. He also readily acknowledged that a major impetus for the arrangement was a change in the law that prohibited non-lawyers from collecting fees up front for loan modification work. In his opinion these new provisions expressly excluded lawyers from this prohibition.

Therefore he discussed a business arrangement with Mr. Weiskerger where Mr. Chapman’s firm would manage the loan modification work, utilizing Mr. ²⁵¹ Weiskerger’s firm, JW Capital, LLC (“JW Capital”), as a consultant. Ultimately, a Consulting Agreement was executed on November 1, 2008 between JW Capital and the Chapman Firm. Pursuant to that Agreement, JW Capital was to use its best efforts to secure clients for the Chapman Firm. The agreement specifically provided, “In the event that the Consultant shall use the Firm’s name in connection with any advertising or solicitation, Consultant agrees to clear such advertising or solicitation in advance with Client [sic].” In addition, the Agreement contemplated that JW Capital would have potential clients execute a retainer agreement for a fixed fee arrangement for representation by the Chapman Firm.

Specifically, the Agreement states: The Retainer Agreement shall contain a lump sum fixed price which shall be for services to be rendered by the Firm as well as the fees which the Firm will pay to the Consultant for its Services to the Firm for the benefit of the client. The Retainer Agreement shall set forth the manner of payment of any fees by the Client. All fees collected from any Clients shall be promptly deposited into the Firm’s escrow trust fund checking account, and such fees as to which Consultant shall be entitled for its services shall be paid to Consultant by the Firm after the deposits have fully cleared. At the time that Consultant submits the initial Retainer Agreement, Consultant shall set forth on a separate form the amount of the retainer and any proposed fee that Consultant intends to charge for its Services.

Pursuant to the Agreement, the Chapman Firm agreed to utilize the services of JW Capital “to the extent that the Firm deems it in the best interests of the Client.... ” Additionally, the Agreement outlined that the Firm and the Consultant shall meet at least weekly to review and discuss the status of each case referred to the Consultant. Mr. Chapman acknowledged that he managed the Chapman Firm out of a home office in Bethesda, but the loan modification work was done in Baltimore. The rent for that office ²⁵² was paid by JW Capital or an affiliated entity. The periodic case reviews were conducted at the Baltimore office.

The unrefuted testimony from Mr. Chapman was that he met weekly with Mr. Weiskerger to go over their caseload, talk about any problems, and discuss files that needed review. He also testified they were in regular email communication. Mr. Chapman emphasized that he encouraged Mr. Weiskerger to minimize phone communications with clients, and to utilize email to create a paper trail of actions taken in the representation. Mr. Chapman testified that he believed Mr. Weiskerger did an excellent job keeping him informed.

Mr. Chapman testified that the consulting arrangement with JW Capital began in November 2008. He stopped the consulting arrangement and wound down the loan modification following the complaints giving rise to this Petition. During those two years, Mr. Chapman estimated the Firm handled loan modifications for as many as 200 clients, and generated gross revenues of approximately $800,000. He believed that many of their clients came through referrals from prior clients.

He also testified that his firm satisfactorily resolved 95-98% of these matters. At the time the consulting Agreement was implemented, Mr. Chapman and Mr. Weiskerger agreed to price the work around $1,500 for a loan modification, out of which JW Capital would receive $1,300 as a consulting fee, and the Chapman Firm would receive the remaining $200. The Retainer Agreement was structured so fees were due up front, or in a series of installments paid in the beginning of the representation. In Mr. Chapman’s opinion, anyone doing loan modification work without getting a fee in advance was “crazy.” His practice was to deposit the check for fees into the Firm’s escrow account, and then pay the consulting fee to JW Capital after the check cleared.

Mr. Chapman stated he reviewed applicable statutes and the professional conduct rules before entering this arrangement. In his view, Mr. Weiskerger and JW Capital were not doing legal work, and he was paying them for the consulting services they provided for clients they secured. ²⁵³ B. The Bogarosh Loan Modification Barbara Bogarosh employed the Chapman Firm to assist with a loan modification. Ms. Bogarosh testified that she was delinquent on the mortgage on her home as a result of various financial strains. In part, she was unemployed for a period, she was unable to work while caring for a disabled parent out of state for another period, and she was caught up in a familial dispute regarding guardianship for her father.

Although she was initially interested in pursuing a modification when she was unable to meet her payment obligation, her financial situation changed following the death of her father and the resolution of his estate. Ms. Bogarosh was aware she would inherit funds that would enable her to bring her mortgage current. However she was still interested in pursuing a loan modification to restructure the debt and reduce her payments. Initially Ms. Bogarosh spoke to her lender’s attorney at Shapiro and Burson.

When she explained that she wanted to secure a loan modification, she was told she may qualify for certain modification programs. After looking for resources on various websites, she contacted the Chapman Law Group, whom she understood to be doing business as “Keep Our Homes.” She contacted the firm by phone and by email and eventually spoke to James Weiskerger. Ms. Bogarosh could not recall what Mr. Weiskerger represented his position to be within the firm, but she was aware he was not a lawyer. Mr. Chapman utilized business cards for the Chapman Firm, with information for both the Bethesda and Baltimore offices.

Those cards identified Mr. Weiskerger as a “Senior Consultant”. Ms. Bogarosh was told the Firm was experienced in loan modifications. However, unlike other groups, she was told they had an attorney as part of the group. Ms. Bogarosh met with Mr. Weiskerger, checked two of his three references, and eventually agreed to hire the Firm.

Ms. Bogarosh had prior experience with foreclosure and loan modification, as she had faced foreclosure on the same property in 2007. She discussed her current situation with Mr. Weiskerger and understood it ²⁵⁴ was not clear whether she would qualify for a modification, based upon her projected inheritance following her father’s death. Although she discussed the possibility of simply paying the delinquent amount, as she would have the funds to do so, she understood Mr. Weiskerger counseled against that course of action, as she could buy a comparable property for less money in the current market. Therefore, she agreed to pursue loan modification.

On October 19, 2009, Ms. Bogarosh signed a retainer agreement, and agreed to pay a fixed fee of $1,500, to be paid in three installments, for assistance with the loan modification. The retainer agreement with the Chapman Firm was executed and returned to the firm. Ms. Bogarosh said it was a critical factor to her that she was dealing with a law firm, as other groups she talked to were simply debt consolidation firms. Ms. Bogarosh had no direct communications with Mr. Chapman.

Primarily she dealt with Mr. Weiskerger or one of the assistants who worked for him. Ms. Bogarosh paid the initial retainer fee of $500, and the follow up first installment. At the outset of the representation, a foreclosure sale was set for Ms. Bogarosh’s home on January 6, 2010. That foreclosure was postponed, and the Firm continued to try to get her loan restructured.

A second foreclosure sale was set for April 28, 2010, and was again postponed. Ms. Bogarosh communicated with Mr. Weiskerger and his assistants primarily through emails. As the process continued, Ms. Bogarosh expressed concern that there seemed to be a lot of delay, and nothing was finalized. In addition, the home was in need of some substantial repairs, yet she was uneasy about investing money in repairs if the house would be lost to foreclosure.

Starting around April 2010, Ms. Bogarosh testified that she started to leave frequent messages at the Firm but often did not receive a response. She stated she never got a live answer, but had to resort to voice messages and email. ²⁵⁵ After the April 2010 foreclosure was postponed, Ms. Bogarosh was told the Firm would prepare a Statement of Facts on her behalf, and that might help resolve the impasse with the bank. During the summer of 2010, Ms. Bogarosh testified generally about frustration with the lack of progress. Her initial contact person, Rebecca Eberwein, was no longer involved, and she was then communicating with Katie Ricketts, both of whom worked for Mr. Weiskerger.

She testified that she was asked for duplicates of information previously provided, and she seemed to have to repeat the production of information previously sent to the Firm. During her representation by the Firm, Ms. Bogarosh secured a new cell phone number. She communicated the new number to the Firm through phone and email messages, on more than one occasion. On August 3, 2010, Ms. Bogarosh received notice that a third foreclosure date was set for August 11, 2010.

She forwarded this information to the Firm by email on August 3, 2010 at 12:20 p.m., asking, “Can U make certain this is stopped?” In response to requests for additional documentation on August 4, 2010, she responded to Katie Ricketts the following day, reiterating her employment status and the documentation previously provided. She then stated: Again, I want to meet with you and James. I feel like I keep saying and sending the same things over and over and over again & no one seems to be seeing the documents or putting the whole picture together. If we meet in person, I can hand hold U through all the documents & U can know that U have everything....

On August 9, 2010, Ms. Bogarosh contacted the foreclosure attorneys directly seeking a postponement of the sale based upon the pending modification request with the Chapman Firm. She again emailed the Firm noting the pending foreclosure stating, “Please take care of this.” (Emphasis in original.) She sent a follow up email to James Weiskerger on August 9, 2010 at 4:53 p.m. stating: ²⁵⁶ Have spent the last hour on the phone with 5 different people at PHH — and I still do not have an indication that the house has been removed from the foreclosure sale list. Can U please take care of this? I can’t get through to U directly.

I can’t understand why this was not taken care of last week. We need to talk. Barbara A similar, urgent email was forwarded to the Firm, with a copy to Mr. Weiskerger on August 10 at 9:08 a.m., stating in pertinent part: This is the third time I’ve produced the same documents, albeit updated. Again, I want to meet with James (who I hired to do this) and you so that we have a time line and a game plan where we are all on the same page.

I thought we were on the same page last April, but it appears things have spun out of control again. Pis suggest some times when we can meet. I really want to move this process to the finish line & now that we have PHH’s attn, let’s do it. Later at 6:18 p.m. on August, 9, 2010, Ms. Bogarosh received a follow up from Katie Ricketts as follows: I contacted the bank.

Fortunately, they have received the documents we sent them, and they have been uploaded into the system____The representative I spoke with, Mr. Joe Pennah, made a request to have a hold placed on your sale date so as to allow the bank enough time to review your file. Due to your pending sale date, this request was made with priority. I have been advised to call back tomorrow and make certain that the request for the hold on your sale date has gone through. Please check your email frequently tomorrow as I plan to call upon your file many times.

I will be following up with you via email. Ms. Bogarosh testified she tried, without success, to get confirmation of postponement from the bank the next morning, but was told the request was still pending. ²⁵⁷ The next email produced from The Chapman Firm is dated August 10, 2010 at 6:23 p.m. from Katie Ricketts stating: Please confirm that you have filed a chapter 13 bankruptcy with Crystal Barnett in order to stop your sale date. Also; the only number we have on file for you is 240-4400-0079[sw; ]. I have been calling this number but it does not work.

Please let me know a number where you can be reached. Again, please file a Chapter 13 Bankruptcy with Crystal. Time is of the essence. Upon receipt the next day, Ms. Bogarosh responded at 10:59 a.m.: I picked up your emails this morning.

I’ve called Crystal, but she is busy. It think it is too late. I am just unspeakably angry about this. This should have been taken care of last week.

I would have had time to file BR had I known you’d not been vigilant in guarding my interests. Three minutes later, Katie responded that the Firm typically does not advise to file bankruptcy until the evening before the foreclosure, as they see it as a last option. She then provided names of possible firms for use. The foreclosure sale occurred as scheduled on August 11, 2010.

Later communications from Ms. Bogarosh that day, and in the ensuing couple of days, simply reiterated the breakdown that occurred. As documented in prior emails, she had communicated and verified a new phone number months before the August foreclosure date. Her frustration is summarized in her email from August 11, 2010 at 11:43 a.m.: I have called CLG multiple times in the last 10 days and left my phone number, 240.444.0178, but no one returns my calls. It is too late.

The foreclosure sale time has passed. My understanding is that once the house is sold, bankruptcy law cannot save it. If U know differently, tell me. I’ve filed Chap. 13 before to save the house from ²⁵⁸ foreclosure & could have done it this time, if you’d been on top of this & I’d heard from you earlier.

You have your own inhouse lawyer, yes? Why didn’t you pass this to Gerald Chapman? Could he not have filed on my behalf at the last minute? Does he think filing Chap. 13 now would save the house from the hands of a buyer who has just purchased?

Ms. Bogarosh reiterated she could have paid the arrearages in August to avoid foreclosure. She acknowledged that she was never guaranteed that she would obtain a modification, but she felt she was led to believe the process would be relatively easy. Until the date of the actual sale, bankruptcy was not discussed, and in her mind, it was not an option based upon the inheritance she received. At the hearing, Mr. Chapman expressed that he was “aghast” at the Bogarosh situation.

Mr. Chapman stopped doing modification work within thirty days after learning what occurred. However he noted that 95% of the time, in his experience, foreclosures are not postponed until the day before they are set. In most instances, he found that postponements occurred when modification requests were pending. Mr. Chapman contended Ms. Bogarosh had to have been aware that bankruptcy was an alternative, as she had followed that course in the past.

Based upon his file review, the problem occurred because Ms. Bogarosh’s new telephone number was not properly logged into their system. The “overwhelming majority” of their communications with her were by email, but by the time she reviewed the critical email to pursue bankruptcy, it was too late. Efforts to communicate by phone were ineffective since the wrong number was still maintained for her. While not excusing the miscommunication and resulting foreclosure that could have been avoided, Mr. Chapman essentially contended it was an isolated failure.

C. The Butler Loan Modification During the fall of 2009, John Butler was in default on four of the seven properties he owned in Maryland. He was ²⁵⁹ referred to Mr. Weiskerger by his sister, who was also attempting to obtain a loan modification. Following an initial meeting, Mr. Butler signed a retainer agreement on October 19, 2009, and agreed to pay $4,500 for assistance to modify the loans on all four delinquent properties. He paid $3,375, which was all but the final installment of that fee.

Mr. Butler communicated directly with Mr. Chapman on only one occasion concerning an unrelated suit in Prince George’s County. Mr. Chapman suggested he should get an attorney in the county to handle that matter. All communications concerning the loan modification were with Mr. Weiskerger or his assistant. Mr. Butler claims he was told to stop making payments on his loans.

Essentially he was told that if he demonstrated he was able to pay the loans, it would delay the modification process. Mr. Chapman adamantly denied it was the practice of the Firm to advise clients not to pay their mortgages. He testified that he harped on this with Mr. Weiskerger, stating the Firm had an absolute policy not to tell clients to stop paying their mortgages. He also indicated he spoke to both of Mr. Weiskerger’s assistants on numerous occasions to reiterate this policy.

Mr. Butler received numerous requests for information concerning the loan modifications, and he responded promptly with the requested information. Eventually he was referred by Mr. Weiskerger to an attorney to file bankruptcy to stop the foreclosure process. Ultimately, he filed for bankruptcy in May 2010. Throughout the process, Mr. Butler was frustrated by repeated requests for duplicate information.

At one point, out of frustration, he faxed information, mailed a duplicate copy, and called to confirm. As of August 2010, the Firm was unsuccessful in obtaining loan modifications for any of the Butler properties. Rather they recommended that he attempt to sell at least one of the properties with some equity, and utilize the proceeds to reduce his debt and then see if he qualified for modification. ²⁶⁰ The major impediment to obtaining the modifications for Mr. Butler was his credit card debt. Mr. Butler testified he was never advised that his credit card debt would prevent him from obtaining a loan modification.

He acknowledged that he was advised that short sales of the properties were probably his best option, but he noted that he did not owe much more than the fair market value for at least some of the properties, so he did not want to pursue that option. Ultimately Mr. Butler believed the Firm did not assist with his difficulties. Mr. Butler stated he would not have engaged the firm if he was aware that he had too much credit card debt to qualify for a loan modification. Mr. Butler eventually filed a complaint with the Attorney Grievance Commission.

Mr. Chapman testified that Mr. Butler’s file reflects that his credit card debt eventually posed an insurmountable difficulty. An initial tally faxed from Mr. Butler on November 3, 2009 listed nearly $72,000 in credit card debt. D. Facts in Mitigation Following receipt of the complaints concerning the Bogarosh and Butler properties, Mr. Chapman wound down his loan modification work. He estimated that a portion of his practice was concluded within thirty days.

Mr. Chapman was candid in his assessment that the communication with Ms. Bogarosh was mishandled, and the house should not have been lost to foreclosure when Ms. Bogarosh had funds to pay the deficiency. He testified generally that it is the nature of loan modification work that foreclosure dates are pulled at the last minute, and that it is difficult to get a definitive answer from a bank. He also testified that the use of bankruptcy proceedings at the last minute to stop a sale is a practice that is employed, but it is done as a last resort. He did not try to justify the Bogarosh lapse on this basis, but did try to explain the reason activities seem to-stall, and then snowball.

Mr. Chapman refunded the $1,500 fee to Ms. Bogarosh. He also refunded $2,000 to Mr. Butler. Finally, these do ²⁶¹ appear to be isolated failures. Mr. Chapman testified that he believed his firm successfully negotiated loan modifications for approximately 95% of the clients that engaged their services.

II

Legal Analysis The Attorney Grievance Commission contends that it presented clear and convincing evidence that Mr. Chapman violated Rules 1.1, 1.3, 1.4, 1.5, 1.15, 5.3, 5.4, 5.5 and 8.4 of the Maryland Rules of Professional Conduct (“MRPC”) in his representation of Ms. Bogarosh, and that he violated all of the same, with the exception of Rule 1.1, in his representation of Mr. Butler. A. MRPC 1.1 MRPC 1.1 provides: A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. The Commission contends that Mr. Chapman failed to provide competent representation to Ms. Bogarosh, essentially arguing that he provided no legal services whatsoever by delegating to others.

In addition, the Commission argues Ms. Bogarosh should have been advised earlier that she may need to file for bankruptcy to delay the foreclosure proceeding. In response, Mr. Chapman argues that he retained JW Capital to provide consulting services, and that they diligently pursued the loan modification on behalf of Ms. Bogarosh. Further, he argues Ms. Bogarosh was well aware of the bankruptcy option, as she had pursued that approach in an earlier loan modification. The evidence presented does not support a finding, by clear and convincing evidence, that the representation was not competent.

Curiously, throughout these proceedings, there was no evidence of any different strategy or approach that should have been employed. Clearly the nature of the loan modification practice is a labor intensive effort to present information to a bank to endeavor to persuade it not ²⁶² to pursue foreclosure and to modify the terms of an existing loan. There was no testimony that Ms. Bogarosh qualified for a modification option that was not pursued. Similarly, there was no evidence that the bank’s failure to grant the modification request, or its failure to grant the request to delay the foreclosure sale were based upon some fault or neglect in the manner this was pursued.

In fact, review of the Chapman Firm file for this representation documents regular follow up with the bank by the JW Capital associate, generally on a weekly basis, in an attempt to advance the efforts. JW Capital appears to have taken the appropriate steps to seek modification. The simple fact that a modification was not obtained does not necessarily imply a lack of competence in the pursuit. This allegation is simply not supported by the evidence.

B. MRPC 1.3 MRPC 1.3 provides: A lawyer shall act with reasonable diligence and promptness in representing a client. The Commission argues that Mr. Chapman failed to act with reasonable diligence and promptness in pursing the Bogarosh and Butler loan modifications. In the Bogarosh matter, they point primarily to the ten month delay, with no result. In the Butler matter, they argue that Mr. Butler would not have continued to pursue representation if he had been told that credit card debt was an impediment.

The Court does not find clear and convincing evidence of a violation of MRPC 1.3. The fact that the Firm was unable to achieve a desired outcome is not, in and of itself, evidence of a lack of diligent pursuit. As noted above, the Firm files from both the Bogarosh and the Butler representations clearly document a persistent series of contacts with lenders in an effort to advance the modification requests. Fundamentally, neither of these cases presented circumstances where the client was entitled to the requested relief.

Both clients acknowledged they were told at the outset that the Firm could not guarantee they would receive a loan ²⁶³ modification. It is the nature of the foreclosure and loan modification practice that even diligent efforts are thwarted at times by a lack of response from a lending institution, or by their failure to negotiate a modification, even in the face of a persuasive request. Again, lack of diligence is not adequately demonstrated on this record. C. MRPC 1.4 MRPC 1.4 provides: (a) A lawyer shall: ...

(2) keep the client reasonably informed about the status of the matter; (3) promptly comply with reasonable requests for information; and (b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. The Commission contends that Mr. Chapman violated MRPC 1.4 in that he failed to respond to requests for information, and to return calls from clients. In the Bogarosh matter, the Commission argues she was not timely advised that the foreclosure sale in August 2010 remained pending, or given sufficient time to pursue bankruptcy. In the Butler matter, the Commission argues he was not timely advised of the difficulties posed by his consumer debt.

In the Butler matter, the Court does not find clear and convincing evidence of a failure to respond to requests for information or to return calls. In fact, Mr. Butler acknowledged that he spoke repeatedly with Mr. Weiskerger. While Mr. Butler denies he was advised that his consumer debt was an impediment to the modification, that recollection seems inconsistent with the strategy he acknowledges that the Firm advised him to employ, which included a bankruptcy petition to eliminate some of the debt. It also seems inconsistent with the acknowledged recommendation to pursue a sale of one or more of his properties.

In the Bogarosh matter, the records clearly document key lapses in timely communication in late July and August ²⁶⁴ 2010. As detailed above, as the August 2010 foreclosure date approached, Ms. Bogarosh clearly and repeatedly requested a meeting to discuss the status of her case and the strategy. She also clearly communicated her new telephone number which was never recorded in the firm’s system. During the most critical time frame, on a day when Katie Ricketts acknowledged in an email that she may be in frequent communication, and later acknowledged that she tried repeatedly to call, the inability to communicate was caused by the consultants acting for the Firm.

Of greater concern, despite repeated requests to schedule a meeting, there was no response by the Firm. Throughout the critical time frame, Ms. Bogarosh’s only substantive communications were with the support staff for the Firm’s consultant. [ 430 Md. 238 (2013).] Mr. Chapman argues Ms. Bogarosh should have been well aware of the possibility of a bankruptcy filing at the last minute, based upon her prior experience. Clearly her financial circumstances were different in 2010 than at the time of her prior bankruptcy, as she had an inheritance and an ability to pay the deficiency on the property. It is not at all clear that a bankruptcy petition could have been filed in good faith in 2010.

Clearly there was no communication concerning the possibility of filing bankruptcy in a timely manner so it could have been pursued by the client. Thus the Court finds that Mr. Chapman violated MRPC 1.4 in his representation in the Bogarosh matter based upon the failure to timely communicate with the client and the failure to respond to requests to meet in the late July and August 2010 time frame. D. MRPC 1.5 MRPC 1.5 provides: (a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following: ²⁶⁵ (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment of the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.

The Commission argues the fees charged in these matters were unreasonable, as no legal services were provided. The Court is not persuaded by this argument. Clearly significant work was done in both cases to pursue loan modifications. Whether that work required legal talent or skill is not the issue.

The fees charged are not unreasonable, based upon the nature of the work that was anticipated at the time the fee was set. Similarly, they are not unreasonable in light of the efforts undertaken to pursue these matters. E. MRPC 1.15 MRPC 1.15 provides: (a) A lawyer shall hold property of clients or third persons that is in a lawyer’s possession in connection with a representation separate from the lawyer’s own property. Funds shall be kept in a separate account and records shall be created and maintained in accordance with Chapter 600 of the Maryland Rules.

Other property shall be identified specifically as such and appropriately safeguarded, and records of its receipt and distribution ²⁶⁶ shall be created and maintained. Complete records of the account funds and of other property shall be kept by the lawyer and shall be preserved for a period of at least five years after the date the record was created.... (c) Unless the client gives informed consent, confirmed in writing, to a different arrangement, a lawyer shall deposit legal fees and expenses that have been paid in advance into a client trust account and may withdraw those funds for the lawyer’s own benefit only as fees are earned or expenses incurred.... The Commission argues Mr. Chapman violated MRPC 1.15 by setting an “up front” fee for the services for Ms. Bogarosh and Mr. Butler.

In part, it argues that MRPC 1.15(c) requires written consent from the client to any arrangement other than withdrawal of fees and expenses from an escrow account only after they are earned by the lawyer. Since no successful modification was obtained, the Commission argues the fees were not earned. This argument is not persuasive. The Retainer Agreements signed by both clients, while not extensive, contain the following language: “The Retainer shall be deemed earned upon receipt by the Firm in light of the commitment in time and resources that the Firm will have to invest in the Retained Matter, because the Firm will be securing the services of one or more consultants and because such retention precludes or limits the Firm’s ability to pursue other client matters.” Based upon the evidence, including this written agreement, the Court finds that both clients were aware the fee was paid up front, and they consented to that arrangement.

The Commission also argues there was a violation of MRPC 1.15 based upon the timing in which funds, once deemed earned, were paid out from the escrow account. On this issue, there was no evidence to verify when funds were deposited, and when they were actually disbursed. The general practice described by Mr. Chapman was that he waited for the checks to clear, then disbursed $200 for his fee with the balance to JW Capital for their Consulting Fee. ²⁶⁷ This does not appear to violate MRPC 1.15, given written consent to a fixed fee arrangement that is deemed earned upon receipt. F. MRPC 5.3 MRPC 5.3 provides: With respect to a nonlawyer employed or retained by or associated with a lawyer: (a) a partner, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the person’s conduct is compatible with the professional obligations of the lawyer; (b) a lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person’s conduct is compatible with the professional obligations of the lawyer; (c) a lawyer shall be responsible for conduct of such a person that would be a violation of the Maryland Lawyers’ Rules of Professional Conduct if engaged in by a lawyer if: (1) the lawyer orders or, with the knowledge of the specific conduct, ratifies the conduct involved; or (2) the lawyer is a partner or has comparable managerial authority in the law firm in which the person is employed, or has direct supervisory authority over the person, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action; ...

The Commission essentially argues that Mr. Chapman abdicated his professional responsibility by ceding all responsibility for the loan modification work to Mr. Weiskerger and his associates. In response, Mr. Chapman argues that he established a system to oversee the loan modification work through regular email communication and weekly review meetings. ²⁶⁸ While I found Mr. Chapman’s testimony credible that he and Mr. Weiskerger were in regular communication, and that they met weekly for a half hour or so to discuss matters, there was no evidence that he had any familiarity with either the Bogarosh or the Butler matters until after the complaints were filed. Rather, the testimony demonstrated that Mr. Weiskerger was responsible for generating much, if not all of the loan modification business. He