Attorney Grievance Commission v. Goff

BELL, C.J. Bar counsel, acting on behalf, and with the approval, of the petitioner, the Attorney Grievance Commission of Maryland, filed in this Court, pursuant to Maryland Rule 16-751, 1 a Petition For Disciplinary or Remedial Action charging the respondent, Randall E. Goff, with violating Rules 1.1, Competence, 2 1.3, Diligence, 3 1.15, Safekeeping Property, 4 5.3, Re ⁴ sponsibilities Regarding Non-lawyer Assistants, 5 8.1, Bar Admission and Disciplinary Matters, 6 and 8.4, Misconduct, 7 of the ⁵ Maryland Rules of Professional Conduct, as adopted by Maryland Rule 16-812, Maryland Rule 16-609, Prohibited Transactions, 8 pertaining to his attorney trust account, and Maryland Code (2000, 2004 RepLVol., 2006 Supp.) § 10-306, Limitation on use of trust funds, 9 of the Business Occupations and Professions Article. We referred the case, pursuant to Rules 16-752(a), 10 to the Honorable Michelle D. Jaklitsch, of the Circuit Court for Anne Arundel County, for hearing pursuant to Rule 16-757(c). 11 ⁶ Following a hearing, the court issued an extensive, detailed and lengthy opinion in which it made findings of fact and drew from those facts, conclusions of law. Although acknowledging that the respondent “holds a license as a title insurance agent from the Maryland Insurance Commission” and is an agent with Fidelity National Title Co., which accounts for “[a]bout eighty percent of Respondent’s present practice (and a commensurate proportion of his income),” the hearing court determined that the grievance matter then before it “arose” from the respondent’s practice of law, “from events surrounding Respondent’s representation of Mark A. Heiss.” That representation involved estate and real estate matters, areas that made up a substantial portion of the other twenty percent of his “practice.” The representation started when Heiss sought the respondent’s services to open an estate for his mother, Vivian Pauline Heiss. The need for such representation was prompted by, and became apparent with, the revelation that the several — there were eight or nine of them — parcels of property on which the house where Heiss and his parents had lived in Anne Arundel County were not titled in his mother’s name, but in the names of Heiss’s father, Raymond, and his two brothers, Charles and Arthur, as “[s]ome of the parcels were titled in Raymond Heiss’s and Charles Heiss’s names and others were titled in all three brothers’ names.” The manner in which the parcels were titled was of some significance to family members and entities other than Mark Heiss, the Estate of his mother and the Estate of Raymond Heiss.

The beneficiaries of the estates of Charles and Arthur Heiss, in addition to the estates themselves, also had an interest in the property. As a result, those interested parties obtained representation to protect their interests. 12 Although ⁷ the interested parties agreed that the properties should be sold, they could not agree on whether and how much Mark Heiss was entitled to be reimbursed for maintenance expenses on the home in which his mother lived. To resolve this issue, the respondent brought an action against the other interested parties. That action was settled.

As relevant to this case: “The agreement called for the properties to be sold, for Mark Heiss to receive $20,000.00 as reimbursement for expenses incurred for the maintenance of the property and, after deducting costs of the sale and payment of all liens and taxes from the proceeds of the sale, the balance of the funds w[as] to be distributed to the estates of the deceased brothers and the various interested parties.” Pursuant to the settlement agreement, the respondent agreed to open an estate in Maryland for Arthur Heiss and, after the properties had been sold, to distribute the proceeds, after costs, to the various interested parties. For his services, the agreement provided that the respondent would be paid, from the sale proceeds, $10,000.00. After being appointed special administrator of the Estate of Arthur Heiss, the respondent opened estates for Vivian Pauline Heiss and Raymond Heiss. Thereafter, all of the parcels of property were sold for $200,000.00, which was deposited into the respondent’s attorney trust account.

Subsequently, within a couple of months of the settlement, all of the proceeds of the sale, except that due to the Estate of Arthur Heiss, had been distributed. Of particular relevance to the case sub judice, in addition to the reimbursement amount provided for in the settlement agreement, Mark Heiss had also been distributed, from his father’s estate, through his mother’s estate, a check for $65,000.00. It subsequently was determined that that distribution was made in error, that it constituted an overpayment. When no distribution had been made to the Estate of Arthur Heiss, inquiry of the respondent as to why was made by John Heiss.

Initially told that distribution would be made after a wait of six weeks, extended to six months, John Heiss ⁸ referred the matter to his attorney when that schedule was not met. John Heiss’s attorney spoke to the respondent on the telephone and sent him a facsimile seeking “confirm[ation] that the final accounting had been prepared and the funds forwarded to the attorney for the Estate of Helen Peters, the sole beneficiary of the Estate of Arthur Heiss, in New Jersey.” The respondent did not respond to that letter. Subsequent letters were sent over the next several months, each seeking information about the “final accounting and the transmission of the escrow funds.” These letters either were not answered at all or answered untimely. Distribution to the Estate of Arthur Heiss was made on or about August 2, 2003, some 13 or 14 months after the settlement on the properties.

By that time, a complaint “concerning Respondent’s conduct in handling the proceeds of the sale of the Heiss properties” had been filed by John Heiss’s attorney with Bar Counsel. Pursuant to that complaint, Bar Counsel wrote the respondent to notify him of the complaint and to request information concerning his side of the matter. Bar Counsel’s letter thus asked for both a written response and “certain financial records relating to the settlement described in the complaint.” Although he supplied the written response, as requested, denying any wrong-doing and indicated that, by then the disbursement had been made, 13 the respondent did not provide the financial records. The petitioner conducted an investigation, during the course of which it obtained records from the respondent and one of its investigators interviewed him.

The respondent offered an explanation for the delay in disbursing the funds to the Arthur Heiss Estate: “He had to wait 6 months after the estate was closed to give creditors an opportunity to file claims; he was unsure whether the old rules or the new rules applied to the estate ⁹ since the decedent passed away in 1963; there was a problem calculating taxes because it was based on the percentage of the interest in the property; he first attempted to probate the estate in Alabama; he had to obtain guidance from the Anne Arundel County Register of Wills Office; and he had a computer failure during April 2003 and had not backed up the system since December 2001; and he was handling two estates for the same family at the same time.” He also maintained that “the funds owed to the Estate of Arthur Heiss remained in [his] trust account until he disbursed those funds to the estate.” As to the latter contention, the findings of the hearing court were to the contrary. It determined that “the balance of the trust account fell below the amounts owed to the Estate of Arthur Heiss between May 15, 2002 and the date the funds were disbursed to the interested parties on or about August 2, 2003.” More particularly, the hearing court found, as to the respondent’s “[t]rust [a]ccount [b]alanee [discrepancies”: “The trust account balance on April 10, 2003 was $378.42. However, at this time, the amount owed to the Estate of Arthur Heiss/Helen Peters was approximately $31,000.00. When including amounts owed to other matters, the trust account should have had a balance of $283,294.88.

($60,-000.00 in trust funds had been erroneously deposited into Respondent’s office/operating account.) “Furthermore, a paralegal employed by Petitioner, John Debone, conducted an analysis of the trust account. Although Respondent did not provide a complete and accurate accounting for all of the funds received and disbursed in connection with the sale of the Heiss Properties, DeBone created a spreadsheet evidencing payments and disbursements for trust account number 9983 where the Heiss funds were deposited, as well as for Respondent’s second trust account number 1794. Petitioner discovered that Respondent disbursed approximately $1,256.87 more than he collected for the Heiss sale. ¹⁰ “Additionally, Respondent paid some of the expenses related to the Heiss sale and estates from his office/operating account. At least four checks totaling $3,775.59 were disbursed from Respondent’s office/operating account on behalf of the Heiss matter. “Respondent’s records also indicate that Respondent generated checks on trust account 9983 and deposited those checks back to the same account.

Respondent told DeBone that Fidelity National[ 14 ] recommended this to create a paper trail when there was a first and second mortgage.” (Record references and footnote omitted). There were other account balance discrepancies that the petitioner discovered, and the hearing court found, in the respondent’s trust account. They related to transactions other than the Heiss settlement and resulted primarily from the respondent’s disbursal of funds for the transaction before the funds for the settlement were deposited. The time discrepancy was as much as almost two and a half months and the amount involved, as much as $200,000.00.

There were also instances in which the “[rjespondent’s records reflected that there were funds for some settlements conducted in 2002 and 2003 that had not yet been disbursed by March 2004.” The hearing court found also that, in some of the non-Heiss settlements, the respondent’s records did not match the bank records, i.e.: “Checks marked void on Respondent’s records had actually cleared the account. Funds in the same amount were disbursed twice to the same person, deposits to the bank account did not appear on Respondent’s records, and checks were negotiated through the bank that did not appear on Respondent’s records.” (Record references omitted). The accidental deposit of trust funds into the respondent’s office/operating account was another reason for the discrepancy in the records. Although the respondent became aware of the mistaken deposit within a ¹¹ week of its occurrence and took some corrective action immediately, the hearing court determined that, contrary to his testimony, “the mistakes were not corrected entirely until June 2, 2003,” more than two months later.

During the petitioner’s investigation of the Heiss matter, overdrafts in one of the respondent’s trust accounts, albeit not the one used in the Heiss settlement, were reported. This prompted an expansion of the investigation to cover these matters and, therefore, a request for information with respect to them. As to this aspect of the petitioner’s investigation and the respondent’s response, the hearing court reported: “On March 8, 2004, while the investigation of the Heiss matter was ongoing, Bar Counsel received notification of an overdraft on a second Wachovia Bank attorney trust account (account number ending in 1794) held by Respondent. On or about March 11, 2004, Bar Counsel wrote to Respondent and requested, within ten days, an explanation for the overdraft and copies of financial records relating to attorney trust account number 1794.

Respondent did not respond within ten days. “On or about March 17, 2004, Bar Counsel received notice of a second overdraft occurring on March 12, 2004 in this same attorney trust account. On or about March 17, 2004, Respondent was notified by letter of the second overdraft notice. Bar Counsel’s letter requested that Respondent provide an explanation for the overdraft and copies of financial records within ten days. Respondent did not respond in a timely manner to this request for information. “On or about March 19, 2004, Bar Counsel received notice of a third overdraft in attorney trust account 1794.

The matter was then docketed for investigation. On or about April 20, 2004, Assistant Bar Counsel wrote to Respondent to notify him that the matter had been docketed and to request an explanation for the overdrafts and copies of financial records. “Respondent responded to Bar Counsel’s letters of March 11 and 17, 2004 on or about April 21, 2004. Respondent ¹² explained that the overdrafts occurred because he had opened a new trust account on January 1, 2004, but that several lenders had wired proceeds from settlement transactions to the old account rather than to the new one.... In this response, Respondent failed to provide all of the documents Bar Counsel requested.

Mr. DeBone was able to confirm that there appeared to be deposits made to the old account that should have been made to the new. Mr. DeBone was also able to track several instances where Respondent corrected this by transferring funds from the old account to the new account in February 2004. At one point. Respondent had corrected the mistake by transferring funds from the old account to the new account, but then erred by disbursing funds for that settlement from the old account.

By March 2, 2004, however, all of the mistakes were corrected. “The overdrafts occurred not because of these wiring mistakes, but due to a double payment of $374,977.17 to Homecomings Financial from the new trust account. “Respondent did not include this in his explanation to Bar Counsel on April 21, 2004. On February 11, 2004, a double payment of $374,977.17 had been made from account number 1794 to Homecomings Financial. Respondent wired funds to Homecomings even though he had already issued a check in the same amount. Homecomings Financial told Respondent that the check was sent to the wrong office and that they would give Respondent an immediate credit for the funds with no additional interest accruing to the borrower, if Respondent wired the funds to them.

After Homecomings gave Respondent its word, Respondent wired the funds. Respondent did not place a stop-payment on the check and the check cleared the same day the funds were wired. He was aware of the double payment as early as March 14, 2004. On March 19, 2004, the funds were returned to the attorney trust account. “In the meantime, however, funds held in the new trust account as a result of other real estate settlements had been used to cover the deficit caused by the duplicate $374,977.17 disbursement.

The bank records establish that $231,341.28 ¹³ owed from the trust account as a result of a settlement deposit for a party named Fogle could not be disbursed from the account on March 2 and 9, 2004. The March 2nd report from the bank indicates that there was only $126,976.55 in the account. The funds for the Fogle transaction were deposited on March 1, 2004 and were transferred out of the account on March 28, 2004. “Assistant Bar Counsel wrote Respondent again on June 8, 2004, requesting more information concerning the overdrafts within 15 days. This information was needed to complete the analysis of account number 1794.

Respondent did not respond to the June 8, 2004 letter within 15 days. “Respondent also failed to respond to requests for information in connection with the Heiss investigation. On March 31, 2004, Petitioner sent Respondent a letter in connection with the Heiss investigation which included a request for information within 10 days. Bar Counsel needed this information to complete the analysis of the account. Respondent did not respond within ten days. “On April 14, 2004, another request for information was sent to Respondent requesting a response to the March 31st letter within 10 days.

On June 3, 2004, DeBone spoke to Respondent by telephone. Respondent said that he was not aware of the letters and that he was going out of town. DeBone told Respondent that he would fax the letters to Respondent. Respondent did not say that was necessary.

Respondent told DeBone that he would have somebody working on the documents requested while he was gone. A follow-up letter was sent on June 4, 2004. Respondent, however, did not respond. “Respondent’s daughter got married on May 23, 2004 and his son got married on June 6, 2004. Respondent provided some of the information following the issuance of a subpoena in November 2004.

Respondent also provided additional information to Petitioner after December 2004.” (Record references omitted). Trust account 1794 was the subject of a 2004 audit by Fidelity, whose regional manager, Frank Jablonski, was close ¹⁴ ly monitoring the respondent’s record keeping and financial accounting. 15 That audit “[n]oted file shortages, including deposits remaining outstanding or in transit for more than 72 hours, and 196 outstanding checks in excess of 90 days old.” A 2005 audit of the same account yielded similar results: “file shortages and 220 outstanding checks more than 90 days old.” This is inconsistent with Fidelity policy, which is “to have deposits made immediately or, if not possible, within 72 hours. The respondent was not sanctioned for his deficiencies. Contributing to the respondent’s record keeping and financial transactions issues were computer crashes that the respondent experienced.

The hearing court made findings in that regard: “Respondent maintained records of his real estate settlements and his financial transactions on his office computer. In the spring of 2002, Respondent’s software stopped working properly. He subsequently switched to a new software program. Respondent was able to recover most of what was lost during this incident from the computer and from paper records.

The second computer problem occurred in the spring of 2003. Rather than a software problem, in this incident Respondent’s hard drive crashed. He was not able to recover anything from the hard drive after this second incident. The only thing that came up on the monitor was a blue, error screen.

The hard drive had reformatted itself so that it no longer contained any information. He had last backed up his computer in December 2001, so that he was able to recover that information, but data from December 2001 through April 2003 was gone and could not be retrieved.” (Record references omitted). Fidelity did not require the use of any particular computer software program, although Mr. ¹⁵ Jablonski had suggested to the respondent a “free software program” that he could use. Other than requesting that he open a new account and get a new computer, Mr. Jablonski offered no advice after learning of the computer crash.

The respondent is assisted in his recordkeeping by an employee, whom he trained, and who has been so employed for about six years. As to her work and the respondent’s supervision, the hearing court commented: “Ms. Andrews enters financial information concerning the real estate settlements into Respondent’s computer and prepares the documents for settlement. Respondent would also make these entries. It was not Ms. Andrews’ job to back up the computer data.

Ms. Andrews prepared monthly Reconciliation Reports for Respondent’s attorney trust account. She would discuss these reports with Respondent. The April, May, June, and December 2002 reports reflect a shortfall in the trust accounts. “Ms. Andrews testified that lending banks made errors. They would indicate that they were sending one amount, and then send another.

Although Respondent’s office is no longer depositing funds into trust account number 9983, the account still has a balance of approximately $5,000.00. Ms. Andrews started getting the account cleared up about a year ago and is still working on disbursing those funds to the rightful owners.” (Record references omitted). With respect to the allegations concerning the respondent’s practice in the Orphans’ Court, the hearing court found: “Respondent failed to timely file inventories and accountings with the Orphans’ Court for Anne Arundel County for the Estates of Arthur, Raymond and Vivian Heiss. For the Estates of Raymond and Vivian Heiss, Respondent failed to timely file information reports.

Respondent told Biennas [the petitioner’s investigator] that the Orphans’ Court routinely issues Show Cause Orders to show that it is time to file the necessary documents.” ¹⁶ (Record references omitted). The court also confirmed that the respondent obtained a commission, in the amount of $2,940.00, from the Orphans’ Court for acting as special administrator of the Estate of Arthur Heiss, which he collected, but returned when John and Wilda Heiss, believing that the $10,000.00 fee previously paid to the respondent compensated him for all of his work in the Heiss matter, objected. The hearing court found, however, that “[i]t was Respondent’s understanding that his $10,000.00 fee did not cover the Heiss estate work. The terms of the Heiss settlement agreement state that the $10,000.00 is to cover Respondent’s resolution of the title issues; there is no mention of a fee for estate work.

Therefore, Respondent applied for a commission in the Estate of Arthur Heiss.” On these findings of fact, the hearing court concluded that the respondent violated Rules 1.1, 1.3, 1.15(a) and (d), 8.1(b), 8.4(d) of the Rules of Professional Conduct and Maryland Code (2000, 2004 Repl.Vol., 2006 Supp.) § 10-306 of the Business Occupations and Professions Article. It also concluded that the respondent was practicing law when he engaged in this misconduct. On the other hand, the hearing court declined to find violations of Rules of Professional Conduct 5.3(b), 8.1(a) and 8.4(c) and Maryland Rule 16-609, stating that “[tjhere is not clear and convincing evidence that Respondent violated” them. Whether the respondent was practicing law was required to be considered when the respondent moved to dismiss the Petition for Disciplinary or Remedial Action on the basis that “he was not practicing law” when the charged rule violations occurred.

The respondent relied on Attorney Grievance Comm’n v. Lichtenberg, 379 Md. 335 , 842 A.2d 11 (2004) and Attorney Grievance Comm’n v. Davis, 379 Md. 361 , 842 A.2d 26 (2004), in both of which this Court dismissed the disciplinary petition, holding: “Where the basis of Bar Counsel’s complaint relates to conduct not connected with the practice of law, it would be inappropriate for this Court to determine in the first instance if respondent violated the Insurance Article, and ¹⁷ then to impose sanctions with respect to his license to practice law, particularly where the [Insurance] Commissioner was aware of the conduct and declined to exercise his authority to regulate respondent’s conduct as an agent or broker.” Lichtenberg, 379 Md. at 356 , 842 A.2d at 23 . See Davis, 379 Md. at 376 , 842 A.2d at 35 (indicating that the case was being dismissed for the reasons stated in Lichtenberg). We also held in Lichtenberg that the respondent in that case had not violated Rule 1.15(a) of the Rules of Professional Conduct, his conduct in that regard not having been in connection with the legal representation of a client. 379 Md. at 358, 842 A.2d at 24. The respondent deduced from these propositions, and therefore argued, that a person acting as an insurance agent is not practicing law and from that proposition, he concludes that activities of title insurance agents are not subject to the MRPC or to the IOLTA (Income on Lawyers’ Trust Accounts) rules.

Rejecting this argument, the hearing court distinguished Lichtenberg and Davis from the case sub judice. It explained: “Lichtenberg is distinguishable from the case at hand because the Court found that Lichtenberg did “not engage in the active practice of law but instead was acting as a title agent whose main business activity is to conduct real estate settlements.... ” [379 Md.] at 353[, 842 A.2d at 22]. Similarly, the respondent in Davis was not practicing law during the relevant events, he was engaging in title insurance work; the Commission did not allege that the respondent improperly handled the trust account used in his legal practice, it alleged only that respondent’s title insurance company was improperly retaining the benefit of the interest earned in the “sweep accounts.” Davis, 379 Md. at 366 [, 842 A.2d at 29 ]. In this case, while Respondent is a title agent, Respondent was practicing law during the relevant events.

He had to open and administer three estates and, unlike the Lichtenberg case, he maintained the settlement ¹⁸ funds in an attorney trust account rather than in a Maryland Affordable Housing Trust (MAHT).” Having concluded that the respondent was practicing law, the hearing court turned to the merits of the charged rule violations. Having reviewed how this Court has interpreted Rule 1.1, see Attorney Grievance Comm’n v. Guido, 391 Md. 33, 54 , 891 A.2d 1085, 1097 (2006) (“Evidence of a failure to apply the requisite thoroughness and/or preparation in representing a client is sufficient alone to support a violation of Rule 1.1.”); Attorney Grievance Comm’n v. Ober, 350 Md. 616, 630 , 714 A.2d 856, 863 (1998) (“[TJhoroughness and preparation reasonably necessary for competent representation includes the proper management of case files”), the hearing court found that “the combination of Respondent’s lackadaisical handling of trust funds, his unreliable recordkeeping system, his failure to routinely back up his computer, and his lack of urgency in correcting the errors once discovered rise to the level of incompetent representation.” With respect to the handling of the trust account, relying on Attorney Grievance Comm’n v. Brown, 380 Md. 661, 667-68 , 846 A.2d 428, 431 (2004) and Attorney Grievance Comm’n v. Maignan, 390 Md. 287, 296-97 , 888 A.2d 344, 349 (2005) (unintentional conduct does nor negate incompetence), it concluded, more particularity, that “[fjailure to properly maintain a client’s settlement monies in an escrow account may also demonstrate incompetence under MRPC 1.1.” The respondent’s incompetence was reflected, the court said, in his distribution, in the Heiss settlement, of $1,256.87 more than he collected and in his giving Mark Heiss $12,978.00 more than he was due. 16 ¹⁹ The court noted particularly the respondent’s failure promptly to disburse the money owed to the Arthur Heiss Estate, citing Attorney Grievance Com’n v. Zuckerman, 386 Md. 341, 369 , 872 A.2d 693, 709 (2005) and observing that 13 to 14 months elapsed before the funds were delivered and that the delay was not lost on the Orphans’ Court, which scheduled a show cause hearing to consider the reason for the respondent’s failure to file the Inventory and First Administration Account. 17 It also observed: “Respondent was not well prepared to handle the complexities of the estate work. Respondent explained that his delay was, in part, due to the fact that he had to consult with the Anne Arundel County Register of Wills office, he had a problem calculating taxes, he had mistakenly attempted to probate in Alabama, and he was not sure whether the old rules or the new rules applied to the Estate of Arthur Heiss because he had passed away in 1963. While these deficiencies alone may not rise to the level of incompetence, this Court finds that when considered in totality and as Respondent’s explanation for the 13 to 14 month delay, they provide clear and convincing evidence that Respondent failed to provide competent representation.” (Record references omitted).

The hearing court determined that the respondent did not act with reasonable diligence and promptness in the representation of any one of his three estate clients: the estates of Arthur Heiss, Raymond Heiss and Vivian Pauline Heiss. In each, the administration accounts were not filed when due and, in fact, were not filed until after a show cause order regarding the failure to file had been issued and, then, well after the return date. Moreover, in none of the cases is there an ²⁰ explanation for the delay. In the Arthur Heiss matter and the Vivian Pauline Heiss matter, the respondent did not appear at the Show Cause hearing.

Although addressing the Arthur Heiss Estate, the hearing court made the point: “Respondent apologizes for not appearing at the Show Cause hearing on June 12, 2003, however, Respondent provides no explanation for the delay in filing the required documents.” The basis for the Rule 1.15(a) violation was twofold: “[o]n at least three occasions, Respondent disbursed funds to clients before their settlement checks were deposited,” citing Zuckerman, 386 Md. at 372 , 872 A.2d at 711 , and the respondent “failed to preserve complete and accurate records for his account funds,” a proposition with which the respondent agrees, at least insofar as the “record of the Heiss receipts and disbursements” is concerned. As to the latter, the respondent’s computer crashes are a significant consideration: “... Respondent backed up his computer in December 2001----[A] software crash occurred in April 2002. Even though Respondent lost data and suffered this crash, he failed to back up his computer for another year.

Respondent explained in testimony that he did not back up his computer after the crash in April 2002 because he did not know how accurate the information was on his system. Respondent said that he did not back up the server more frequently because it had to be done when no one was using the computers, it took about four hours to perform, and someone had to be present to switch the tapes, so it could not occur during work hours. Even if true, this Court finds that this rationale is inadequate. Respondent failed to adequately back up his computer records and, therefore, must bear some of the blame of the data lost due to the computer failures.” (Record references omitted).

The former was also the basis for the hearing court’s conclusion that the respondent violated § 10-306 of the Busi ²¹ ness, Occupations & Professions Article. It reasoned in that regard: “The evidence established that it was Respondent’s practice to conduct settlements prior to depositing the funds for those settlements and that Respondent knew that there were times