Attorney Grievance Commission v. Kobin

BARBERA, J. The Attorney Grievance Commission (“Commission”), acting through Bar Counsel, filed a Petition for Disciplinary or Remedial Action on May 11, 2012, against Respondent, attorney Jason A. Kobin. The petition alleged that Respondent engaged in professional misconduct by failing to supervise his nonlawyer assistant, manage his trust account, maintain withholding taxes in trust, and pay withholding taxes to the appropriate taxing authorities. Pursuant to Maryland Rules 16-752(a) and 16-757(c), we designated the Honorable Angela M. Eaves of the Circuit Court for Harford County to hear the matter and make findings of fact and conclusions of law. Judge Eaves conducted a hearing on October 10, 2012, at which Respondent testified on his own behalf.

Judge Eaves issued a memorandum opinion on November 21, 2012. Judge Eaves concluded, by clear and convincing evidence, that Respondent violated Maryland Lawyers’ Rules of Professional Conduct (“MLRPC”) 1.15(a) and (b) (safekeeping property); 5.3 (responsibilities regarding nonlawyer assistants); 8.1(a) and (b) (bar admission and disciplinary matters); and 8.4(a), (b), (c), and (d) (misconduct). Judge Eaves also concluded that Respondent violated Maryland Rules 16-606.1 (attorney trust account record-keeping), 16-607 (commingling of funds), and 16-609 (prohibited transactions), as well as Maryland Code (2000, 2010 Repl. Vol.), § 10-306 of the Business Occupations and Professions Article (“BOP”) (misuse of trust money).

We agree. A Per Curiam Order disbarring Respondent was entered on May 2, 2013. We now explain the reasons for Respondent’s disbarment. I. A. Findings of Fact Judge Eaves made the following findings of facts by clear and convincing evidence.

See Md. Rule 16-757(b) (“[Bar Counsel] has the burden of proving the averments in the petition by clear and convincing evidence.”). Respondent was admitted to the Maryland Bar in 1999 and is not licensed to ⁵⁶⁹ practice law in any other state. Shortly after being admitted to the bar, Respondent started his own practice, The Law Offices of Jason Kobin and Associates, LLC. Respondent had offices in Bel Air, Dundalk, and Salisbury, Maryland, and employed between six and ten attorneys at any given time.

Respondent now operates his practice from his residence. Respondent contracted with Central Payroll Management (“CPM”) to manage Respondent’s taxes and employee payroll matters. CPM was responsible for sending Respondent’s employees’ federal and state withholding taxes to the Internal Revenue Service (“IRS”) and the Maryland Comptroller, respectively, and for preparing and issuing Respondent’s employees’ paychecks and tax withholding documents. CPM made payments to the taxing authorities and issued employee paychecks after withdrawing funds from Respondent’s bank account with Bank of America, believing the transfers were approved.

CPM later received notice from Bank of America, on more than one occasion, that there were insufficient funds in the firm’s bank account. Bank of America then reversed the transfers and charged CPM withdrawal fees. CPM can-celled the issued paychecks, but because CPM already had paid electronically Respondent’s employee withholding taxes, CPM could not cancel those payments and had to pay Respondent’s withholding taxes with its own funds. When CPM eventually cancelled its contract with Respondent, the firm owed CPM approximately $1,720.

Respondent’s payments to CPM bounced three or four times before CPM recovered the full balance owed by Respondent’s firm. Sarah Williams worked as an associate attorney for Respondent’s firm from January 2007 until June 2010. Ms. Williams was to receive a paycheck every two weeks, but often was paid late or was asked to wait before depositing her checks. Ms. Williams also requested her W-2 statement from Respondent multiple times but did not receive the document from Respondent until several months after she filed her tax return for that year. 1 In 2011, Ms. Williams filed a complaint with the ⁵⁷⁰ Commission because Respondent did not timely provide Ms. Williams with a W-2 statement.

Thomas J. Madden, Jr. began his tenure with Respondent’s firm as an associate attorney in 2008 and eventually resigned in September 2011. As with Ms. Williams, Respondent failed to pay Mr. Madden on time. Mr. Madden occasionally received partial wages and never received a W-2 statement from Respondent despite multiple requests. Both Ms. Williams and Mr. Madden had to file their tax returns without W-2 statements.

Respondent hired Donna Herr to assist his office manager, Stephanie Mahon. Ms. Herr was 18 years old when she began working for the firm and previously worked at Burger King. Ms. Herr subsequently became the firm’s office manager. Respondent did not advise Ms. Herr, who was not an attorney, of the rules regarding trust accounts, nor did Respondent train her how to comply with those rules.

Respondent testified that he believed Ms. Herr “understood” that she should not do anything improper with the trust account, despite her lack of training. Respondent authorized Ms. Herr to write checks from the trust account and did not keep records relating to that account. Respondent “occasionally” checked bank statements online to ensure there were sufficient funds in the account to cover the cheeks Ms. Herr wrote. Respondent admitted that he did not understand the Maryland Rules regarding attorney trust accounts and did not review the rules pertaining to “Interest on Lawyers Trust Accounts” (“IOLTA accounts” or “trust accounts”).

Respondent, for example, believed that the flat fees paid by his clients could be spent immediately and did not need to remain in the trust account until earned. Respondent commingled client fees and personal funds by depositing both into the trust account and using client funds in that account to pay for personal and business expenses. Re ⁵⁷¹ spondent authorized Ms. Herr to write checks from the firm’s trust account for employee paychecks and other business operating expenses. Ms. Herr also issued paychecks to a “Marilyn Walther,” an individual whom Respondent did not know and who was not an employee of the firm.

One check written by Ms. Herr was to herself for “wages/invoices.” Respondent approved of this practice and reviewed invoices to ensure that Ms. Herr’s payments to herself were legitimate. Respondent did not pay employee withholding taxes for Ms. Williams and Mr. Madden in 2010 and 2011. Withholding taxes were not kept in a separate trust account, and Respondent failed to keep records of the amount of taxes withheld. Respondent blamed CPM for refusing to release the W-2 statements until Respondent fully paid the firm’s outstanding balance.

Respondent also failed to file required IOLTA reports and did not believe this failure was wrongful. Respondent asserted to Bar Counsel that his bank records could be sufficiently reconciled against his client files and a master ledger he kept for all of his cases. Yet, Respondent did not submit timely to Bar Counsel those bank records. The Commission made a lawful demand for Respondent’s trust account records during discovery.

Respondent failed to respond to those requests. Respondent testified that he did not provide the requested records because they did not exist in the form requested by the Commission. Only upon questioning at the hearing did Respondent inform Bar Counsel and the hearing judge that the requested trust account records did not exist. At that time, Respondent conceded that his operating account records did exist but nonetheless did not provide them to the Commission.

Judge Eaves found that Respondent knowingly made false statements in his Response to Ms. Williams’s complaint. In particular, Respondent had asserted that Ms. Williams made an “absurd and completely false” allegation that checks written on the IOLTA account had bounced. Judge Eaves found that Respondent was aware of bounced checks and insufficient funds in his accounts, and therefore his statement was know ⁵⁷² ingly false. Judge Eaves additionally found that Respondent had lied to the Commission about the outstanding money Respondent owed to CPM.

B. Conclusions of Law Withholding Taxes Rule 1.15 of the Maryland Lawyers’ Rules of Professional Conduct, in pertinent part, 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 maintained pursuant to Title 16, Chapter 600 of the Maryland Rules, and records shall be created and maintained in accordance with the Rules in that Chapter. Other property shall be identified specifically as such and appropriately safeguarded, and records of its receipt and distribution 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.

(b) A lawyer may deposit the lawyer’s own funds in a client trust account only as permitted by Rule 16-607 b. (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. (d) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this Rule or otherwise permitted by law or by agreement with the client, a lawyer shall deliver promptly to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall render promptly a full accounting regarding such property.... ⁵⁷³ Judge Eaves concluded that Respondent violated MLRPC 1.15(a) by failing to maintain a separate trust account for withholding employee taxes.

She based that conclusion on the fact that CPM withdrew funds for withholding taxes and payroll from the same operating account. Judge Eaves also concluded that Respondent’s failure to withhold taxes for the taxing agencies violated MLRPC 1.15(a) and (b). Commingling, Recordkeeping, Misuse of Trust Money Judge Eaves further concluded that Respondent violated Maryland Rules 16-606.1, 16-607, and 16-609; and BOP § 10-306 by commingling funds, misusing trust money, and failing to keep adequate records. First, Judge Eaves found that Respondent failed to keep trust account records as required by Maryland Rule 16-606.1. 2 Respondent further did not produce any bank records or a master ledger sufficient to reconcile against client files.

Based on these facts, Judge Eaves concluded that Respondent violated Rule 16-606.1. Second, Judge Eaves found that Respondent engaged in commingling, as prohibited by MLRPC 1.15 and Maryland Rule 16-607, 3 by depositing both client-entrusted funds and personal funds into the trust account. Judge Eaves further ⁵⁷⁴ concluded that Respondent’s failure to review the Rules and understand that flat fees did not immediately become earned funds violated MLRPC 1.15. Third, Judge Eaves concluded, by clear and convincing evidence, that Respondent used funds in the trust account for wages and other operating expenses, and he failed to preserve client-entrusted funds for the benefit of his clients in violation of Maryland Rule 16-609. 4 Judge Eaves concluded that this conduct further violated BOP § 10-306, which provides that “[a] lawyer may not use trust money for any purpose other than the purpose for which the trust money is entrusted to the lawyer.” ⁵⁷⁵ Responsibilities Regarding Nonlawyer Assistants When a lawyer or law firm employs nonlawyers, MLRPC 5.3 provides that: (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;....

Judge Eaves found, by clear and convincing evidence, that Respondent did not train Ms. Herr with respect to the trust account, let alone supervise Ms. Herr other than by ensuring there were sufficient funds in the account to cover the checks she wrote. Moreover, Respondent delegated to Ms. Herr the authority to write checks from the attorney trust account for wages and other operating expenses. Because this conduct was not compatible with Respondent’s own professional obligations under MLRPC 1.15, Maryland Rules 16-607 and 16-609, and BOP § 10-306, Judge Eaves concluded that Respondent violated MLRPC 5.3. ⁵⁷⁶ Bar Admission and Disciplinary Matters Under MLRPC 8.1, a lawyer, “in connection with a disciplinary matter,” shall not: (a) knowingly make a false statement of material fact; or (b) fail to disclose a fact necessary to correct a misapprehension known by the person to have arisen in the matter, or knowingly fail to respond to a lawful demand for information from an admissions or disciplinary authority, except that this Rule does not require disclosure of information otherwise protected by Rule 1.6. Judge Eaves found that Respondent lied in his Response by characterizing as “absurd and completely false” Ms. Williams’s allegation that checks written on the IOLTA account had bounced.

Judge Eaves concluded that this statement was false because Respondent admitted to his responsibility for monitoring the account balance and to his knowledge that several checks written from the account were returned for insufficient funds. Judge Eaves further found that Respondent lied to the Commission about the amount of money owed to CPM. Based on these factual findings, Judge Eaves concluded that Respondent violated MLRPC 8.1(a). Additionally, Judge Eaves found that Respondent violated MLRPC 8.1(b) by faffing to respond to the Commission’s discovery requests for records relating to his trust account, and by failing to disclose before the hearing that those records did not exist.

Misconduct MLRPC 8.4 provides: It is professional misconduct for a lawyer to: (a) violate or attempt to violate the Maryland Lawyers’ Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another; (b) commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects; (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation; ⁵⁷⁷ (d) engage in conduct that is prejudicial to the administration of justice; ... Judge Eaves found that Respondent was required to withhold and pay income taxes for his employees and did not do so for the 2010 and 2011 tax years. See 26 U.S.C. §§ 3401 , 7203; Md. Code (2003, 2010 Repl. Vol.), §§ 10-906(a), (b) and 13-1007(b), (c) of the Tax-General Article (“TG”).

Judge Eaves also found that Respondent failed to distribute timely a W-2 statement to Ms. Williams and failed entirely to issue a W-2 statement to Mr. Madden. Based on these factual findings, Judge Eaves concluded that Respondent violated MLRPC 8.4(a), (b), (c), and (d). Mitigation Respondent testified in mitigation that he had a successful practice until his father’s death in 2005, when, as a result, Respondent became depressed and developed a gambling addiction for which he sought inpatient treatment. Respondent also testified that his firm underwent significant financial troubles, which were accelerated by his failure to pay his employees’ wage withholding taxes, and added to his depression.

Judge Eaves found this testimony insufficient to mitigate Respondent’s violations by a preponderance of the evidence because Respondent provided no demonstrative evidence or expert testimony corroborating that his depression or gambling addiction impaired his ability to meet his professional obligations. See Md. Rule 16-757(b). Additionally, Respondent failed to provide evidence of when his gambling addiction began or that he sustained losses that impaired his ability to meet his financial obligations. Judge Eaves therefore concluded that Respondent proved no mitigating factors.

II

A. The Standard of Review “In attorney discipline proceedings, this Court has original and complete jurisdiction and conducts an indepen ⁵⁷⁸ dent review of the record.” Attorney Grievance Comm’n v. Gardner, 430 Md. 280, 288 , 60 A.3d 456 (2013) (quoting Attorney Grievance Comm’n v. Zimmerman, 428 Md. 119, 134 , 50 A.3d 1205 (2012)). “We accept a hearing judge’s findings of fact unless we determine that they are clearly erroneous.” Zimmerman, 428 Md. at 134 , 50 A.3d 1205 (2012) (citing Attorney Grievance Comm’n v. London, 427 Md. 328, 343 , 47 A.3d 986 (2012)). The hearing judge may “ ‘pick and choose which evidence to rely upon’ from a conflicting array when determining findings of fact.” Attorney Grievance Comm’n v. Tanko, 427 Md. 15, 27 , 45 A.3d 281 (2012) (quoting Attorney Grievance Comm’n v. Guido, 391 Md. 33, 50 , 891 A.2d 1085 (2006)). “That deference is appropriate because the hearing judge is in a position to assess the demeanor-based credibility of the witnesses.” Tanko, 427 Md. at 27 , 45 A.3d 281 . We review de novo the hearing judge’s proposed conclusions of law.” Zimmerman, 428 Md. at 134 , 50 A.3d 1205 (quoting London, 427 Md. at 343 , 47 A.3d 986 ). In other words “the ultimate determination ... as to an attorney’s alleged misconduct is reserved for this Court.” Attorney Grievance Comm’n v. Garfield, 369 Md. 85, 97 , 797 A.2d 757 (2002) (quoting Attorney Grievance Comm’n v. Thompson, 367 Md. 315, 322 , 786 A.2d 763 (2001) (alteration in original)).

We examine the record to ascertain whether there was sufficient evidence to support the hearing judge’s legal conclusions by a “clear and convincing” standard of proof. Attorney Grievance Comm’n v. Siskind, 401 Md. 41, 54 , 930 A.2d 328 (2007) (quoting Attorney Grievance Comm’n v. Ward, 394 Md. 1, 16 , 904 A.2d 477 (2006)). B. Exceptions The Commission filed no exceptions to Judge Eaves’s findings of fact or conclusions of law. Respondent takes no exception to Judge Eaves’s findings of fact or conclusions of law relating to his violations of MLRPC 1.15, 5.3, 8.1(b), and 8.4, nor does Respondent contest his violations of Maryland Rules 16-606.1, 16-607, and 16-609, and BOP § 10-306.

In ⁵⁷⁹ deed, Respondent conceded those violations throughout the proceedings. Respondent does take exception, however, to two findings of fact that resulted in Judge Eaves’s conclusion that Respondent violated MLRPC 8.1(a). First, Respondent excepts to Judge Eaves’s finding that Respondent lied to the Commission about the outstanding money Respondent owed to CPM. Judge Eaves found that Respondent was notified when payments made to CPM were reversed for insufficient funds, and that Respondent also was aware of an outstanding balance with CPM.

Still, Respondent stated in his