Attorney Grievance Commission v. Maignan

WILNER, J. In a Petition for Disciplinary or Remedial Action, Bar Counsel, acting for the Attorney Grievance Commission, charged respondent, Peter Maignan, with violating a number of the Maryland Rules of Professional Conduct (MRPC) in the course of his representation of two clients — Hattie Lipscomb ²⁹⁰ and the Magruders. The complaint regarding Ms. Lipscomb was based on Maignan’s alleged mishandling of $4,000 derived from the settlement of an action against her former landlord; the Magruder complaint involved allegations of a failure to provide a written retainer agreement and overcharging. In accordance with Maryland Rule 16-752, we referred Bar Counsel’s petition to Judge Sherrie Krauser, of the Circuit Court for Prince George’s County, to conduct a hearing and present to us her proposed findings of fact and conclusions of law. Bar Counsel has filed exceptions to certain of Judge Krauser’s findings with respect to the Lipscomb complaint, which we find have merit and shall sustain.

We deal first with the Magruder complaint, and do so summarily. Although Bar Counsel charged violations of MRPC 1.1 (competence), 1.5 (fees to be reasonable), 1.15 (safekeeping property), 8.1 (false statement to Bar Counsel), 8.4(c) (dishonesty), 8.4(d) (conduct prejudicial to administration of justice), Maryland Rules 16-604, 16-606, 16-607 and Maryland Code, § 10-306 of the Business Occupations and Professions Article (all dealing with attorney trust accounts), he eventually pressed only the alleged violation of MRPC 1.5. 1 The hearing judge found no violation of that rule, and Bar Counsel has not excepted to that finding. There is no need for us, therefore, to recount the record and make any determinations regarding the Magruder complaint. The Lipscomb complaint is a different matter.

Hattie Lipscomb sued her former landlord in District Court to recover the value of certain property that the landlord had wrongfully removed from the apartment. At some point, she employed an associate in respondent’s office to represent her and paid the associate (and thus the firm) a fee of $750. When that associate left the office in August, 2003, respondent agreed to continue the representation. On or about September 13, 2002, respondent negotiated a settlement of the matter ²⁹¹ for $4,000.

He informed Ms. Lipscomb of the settlement and told her that she would need to come to the office to endorse the settlement check and sign a release. Respondent testified that, after speaking with Ms. Lipscomb, he called his associate, Tesheia Wright and asked her to check the mail for the settlement check and then arrange for Ms. Lipscomb to come to the office to complete the transaction. It is conceded that respondent received the settlement check for $4,000 from Kay Management Co., Inc. by September 15, 2002. 2 Ms. Lipscomb was pleased with the settlement. Her complaint to Bar Counsel, and Bar Counsel’s petition, were based on the delay that occurred in her receiving the proceeds of the settlement.

Ms. Lipscomb did not receive a check from respondent until February 19, 2003 — some four months later- — after she had, pro se, attempted to reopen the District Court case. The check was in the full amount of $4,000, the fee having already been paid. At the hearing before Judge Krauser, respondent contended that a receptionist in his office misplaced the settlement check when it arrived and that he was unaware, until some time in December, that the check had been received and that Ms. Lipscomb had not been paid. Bar Counsel, relying on the settlement check itself and ancillary bank records, asserted that the settlement check had been promptly deposited into respondent’s operating account in September and that, as the balance in the operating account dropped below $4,000 on a number of occasions between the time of the deposit and the time he paid Ms. Lipscomb, he therefore misappropriated the funds.

On that premise, Bar Counsel charged respondent with violations of MRPC 1.1 (Competence), 1.3 (Diligence), 1.4 (Communication with client), 1.15 (Safekeeping property), 5.3 (Responsibility for non-lawyer assistants), 8.1(a) (making false statement to Bar Counsel), and 8.4(a), (b), (c), and (d). Respondent was also charged with violations of Maryland Rules ²⁹² 16-604, 16-606, and 16-607, dealing with attorney trust accounts, and Maryland Code, § 10-306 of the Business Occupations and Professions Article, also dealing with attorney trust accounts. The real controversy was over what happened to the settlement check after it was received by respondent in September. Bar Counsel eventually- conceded that there had been no violation of MRPC 1.3, and respondent conceded that he had, in fact, deposited the settlement check to his operating account, not his trust account, and that he drew the check to Ms. Lipscomb from the operating account.

The hearing judge concluded that Bar Counsel had also conceded that there was no violation of MRPC 1.1, which Bar Counsel denies and which the record shows was not the case. Giving no weight whatever to the check itself, to the ancillary bank records, and to statements made by respondent to an Assistant Bar Counsel during her investigation of the matter, the hearing judge found as a fact that the settlement check was misplaced in respondent’s office, that it was not discovered until late December, 2002, and that it was not deposited until January 6, 2003. On that finding, and with the various concessions (or, in the case of MRPC 1.1, assumed concession), she concluded that respondent had violated MRPC 1.15 and 5.3 and Rule 16-604, but that he had not violated any of the other MRPC Rules, or statutes charged by Bar Counsel. The hearing judge did not specify which parts of MRPC 1.15 respondent violated, but, in light of her other findings, including that respondent had not misappropriated any client funds, it would appear that her finding under MRPC 1.15 was limited to a violation of section (a) of that Rule.

Bar Counsel excepts to her failure to find a violation of MRPC 1.15(b), to MRPC 1.1, which he claims he did not concede, and MRPC 8.4(a) and (d). Original jurisdiction over attorney discipline matters resides in the Court of Appeals. We determine, ultimately, whether an attorney has committed the misconduct charged by the Attorney Grievance Commission. In accordance with ²⁹³ Maryland Rule 16-752, we ordinarily refer petitions for disciplinary action to a Circuit Court judge to act as a hearing officer for this Court, to take evidence and present to us proposed findings of fact and conclusions of law, to which exceptions may be taken.

In all cases, we review the judge’s conclusions of law de novo. Maryland Rule 16-759(b)(l). If exceptions are filed with respect to the judge’s fact-finding, we determine whether those findings have been proven by the requisite standard of proof. Rule 16-759(b)(2)(B).

In doing so, we give “due regard to the opportunity of the hearing judge to assess the credibility of witnesses.” Id. (Emphasis added). It is ultimately for us, however, to determine whether the judge’s findings are, indeed, supported by substantial evidence. It is against the background of these principles that we review the evidence regarding what happened to the settlement check after it was received by respondent in September, 2002.

Ms. Lipscomb testified that, although she was unable to come to respondent’s office immediately, as she was going on vacation, she called the office several times thereafter regarding the matter. She said that on some occasions she spoke with a staff person but was never able to speak with respondent. On January 21, 2003, she wrote to respondent, complaining that she had been trying since November to get the proceeds of the settlement, that “I have made three appointments to come in and talk to you so I could receive my proceeds,” that “[e]ach appointment was cancelled by your office,” that, since January 1, she had called three times, that each time she got a recording and left a message, that none of the calls were returned, that she was finally given an appointment for January 20, 2003, but that, when she arrived, she was told that respondent was unavailable and that she would have to reschedule the appointment. Ms. Lipscomb’s testimony and the statements in her letter were contradicted to some extent by respondent, and it was permissible for the hearing judge to make a credibility assessment with respect to the contradiction. ²⁹⁴ The critical issue before us, however, is not whether Ms. Lipscomb came to respondent’s office or called to complain, but what happened to the settlement check after respondent received it in September: When was it deposited into respondent’s operating account?

If it was deposited in September, as Bar Counsel contends, then, in light of what the bank statements regarding that account reveal thereafter, respondent did, indeed, misappropriate the settlement funds. If, through carelessness, the check was not deposited until January, as the hearing judge found, respondent would be culpable of failing to supervise his staff and failing to place the funds in a trust account, but not misappropriation. Based largely on the check itself and ancillary bank records, Bar Counsel maintained that respondent deposited the check in his trust account on September 18, 2002. Respondent claimed that his former receptionist put the check in a drawer and failed to inform him or the office manager that it had arrived, that he did not learn he had the check until late December or early January, and that the check was not deposited in his trust account until January 6, 2003.

The hearing judge gave no weight at all to the documentary evidence — the check itself — and, crediting the office manager’s testimony and that of respondent, found, as a fact, that the check was not deposited until January 6, 2003. As noted, respondent conceded that his office received the settlement check on or about September 13. A copy of the check was admitted into evidence. On the reverse side appear four printed dates; one is September 18, 2002, and the other three are September 19, 2002.

There are no January, 2003 dates on the check. Immediately following the September 18 date is the number 15018733, which the evidence shows is the account number of respondent’s operating account with Citibank, the account to which respondent conceded he deposited the check. Respondent’s own bank — the depository bank— stamped the check as being handled by it on September 18. That is consistent with Citibank’s records regarding the account.

The bank record of activity on the account during September, 2002, shows a deposit on September 18 of $4,756. ²⁹⁵ Records produced by the bank under subpoena show three checks deposited that day — the check from Kay Management for $4,000 and two personal checks, one for $256 and one for $500 — a total of $4,756. One of the September 19 dates on the back of the check was placed there by Bank of America, the drawee bank. The settlement check shows as the drawee bank NationsBank N.A., but, in Taylor v. NationsBank, 365 Md. 166, 169, n. 1 , 776 A.2d 645, 648, n. 1 (2001), we recognized that NationsBank had merged with Bank of America. It is thus clear from the Bank of America stamp that the check cleared the drawee bank on September 19, 2002.

Another of the September 19 dates is accompanied by another series of numbers, 280215938, which is also stamped on the front of the check. It is not clear who applied that stamp. Respondent did not offer any explanation of how the September, 2002 dates got on the check or why no January, 2003 dates appear on the check. It is clear, really beyond cavil, that the check was deposited on September 18 and that it cleared the drawee bank the next day, September 19.

The hearing judge’s announced finding that “the bank records do not evidence deposit of the settlement check until January 2003” is fundamentally and clearly erroneous. The very document belies the judge’s finding. It is true, as we have indicated, that credibility decisions made by a hearing judge are ordinarily entitled to deference, but, despite the protestations of the dissent, not when the credibility decision is so contrary to unexplained, unimpeached, unambiguous documentary evidence as to be inherently incredible and unreliable. If the check admitted into evidence was blue in color, and we could see it was blue in color, we certainly would not accept the judge’s crediting of the office manager’s testimony that it was yellow.

The situation here is no different. Respondent’s story about organizing a search for the settlement check and not discovering its existence until December is at odds not just with the document itself but also with the ²⁹⁶ story he told to Bar Counsel’s staff in response to their request for information. On March 14, 2003, he wrote to Assistant Bar Counsel, Dolores Ridgell, that “[o]n September 15, 2002, we advised Ms. Lipscomb that we had received the settlement check in this case and requested that she make an appointment to discuss the conclusion of the matter” and that “[d]ue to conflicts between Ms. Lipscomb’s travel schedule and our trial calendar, no such meeting could be arranged before February 2003.” (Emphasis added). He continued, “At all times, however, we advised Ms. Lipscomb that we could place the check in the mail to her attention.

Rather, Ms. Lipscomb requested that we meet to discuss the possibilities of further actions in the matter.” That explanation — that he informed Ms. Lipscomb on September 15 that he had the check and that “all all times” he “could place the check in the mail to her attention” cannot be squared with the assertion that he was unaware that he had the check until December. How could he “at all times” place the check in the mail to her if he didn’t know he had the settlement check? The letter was admitted into evidence and ignored by the hearing judge. Our rejection of the hearing judge’s conclusion that the check was not discovered until December and was not deposited until January fatally undermines nearly all of her other conclusions to which Bar Counsel has taken exception.

The bank records produced by Citibank reveal that, as early as September 19, 2002, and at various times in October, the operating account balance fell below $4,000, which meant that respondent had spent for other purposes all or part of the funds that belonged to Ms. Lipscomb. That constitutes misappropriation of funds that respondent was obliged to hold inviolate in trust for her. Bar Counsel does not argue that the misappropriation was intentional and thus seems to accept that respondent was unaware that the check had, in fact, been deposited in September. He argues, however, that respondent’s failure to maintain the funds in a proper trust account demonstrates incompetence under MRPC 1.1 and that it also establishes a ²⁹⁷ violation of MRPC 1.15(a) and (b) and 8.4(d), and he is correct.

In Attorney Grievance v. James, 385 Md. 637, 662-63 , 870 A.2d 229, 244 (2005), we confirmed our holding in Attorney Grievance Comm’n v. Brown, 380 Md. 661, 667-68 , 846 A.2d 428, 432 (2004), that a “Respondent’s failure to properly maintain [a client’s] settlement monies in his escrow account demonstrates his incompetence pursuant to Rule 1.1.” We further concluded in James that a violation of MRPC 1.15 also constituted a violation of MRPC 8.4(a). See id., at 663 , 870 A.2d at 245 , citing Attorney Grievance Comm’n v. Gansler, 377 Md. 656, 699, n. 22 , 835 A.2d 548, 573, n. 22 (2003) and Attorney Grievance Comm’n v. Gallagher, 371 Md. 673, 710-11 , 810 A.2d 996, 1018 (2002). We have long recognized that the failure to maintain settlement funds intact until disbursed — the comingling of personal and client funds — constitutes a violation of MRPC 8.4(d). See Attorney Grievance Comm’n v. Drew, 341 Md. 139 , 669 A.2d 1344 (1996).

The posture of the case, then, is that the settlement check for $4,000 was deposited in respondent’s operating account on September 18, 2002, after his associate, Ms. Wright, allegedly with permission, apparently signed both respondent’s name and that of Ms. Lipscomb on the back of the check, as purported endorsers. Notwithstanding his admission to the contrary in his letter to Ms. Ridgell, we accept that respondent was unaware until at least late December that the check had been received and deposited. Under his own version, he was certainly aware, at least when he claimed to have deposited the check in January, that it was deposited to his operating account, not a trust account. It is also the case that, between the time the check was actually deposited in September and the time the $4,000 was paid to Ms. Lipscomb in mid-February, 2003, the balance in the operating account fell below $4,000 on a number of occasions.

Ultimately, Ms. Lipscomb was paid the entire $4,000, so her only loss was that of the use of the funds for five months. Relying on Attorney Grievance v. Sperling, 380 Md. 180 , 844 A.2d 397 (2004), which involved an unintentional shortfall ²⁹⁸ in an attorney’s trust account, Bar Counsel recommends an indefinite suspension, which was the sanction imposed in that case. If anything, this case is more egregious than Sperling , as respondent did not even use a trust account but co-mingled Ms. Lipscomb’s funds in his operating account. Nonetheless, we believe that an indefinite suspension is the appropriate sanction.

IT IS SO ORDERED; RESPONDENT SHALL PAY ALL COSTS AS TAXED BY THE CLERK OF THIS COURT, INCLUDING COSTS OF ALL TRANSCRIPTS, PURSUANT TO MARYLAND RULE 16-761, FOR WHICH SUM JUDGMENT IS ENTERED IN FAVOR OF THE ATTORNEY GRIEVANCE COMMISSION AGAINST PETER RICHARD MAIGNAN. BELL, C.J., HARRELL and GREENE, JJ. dissent. Dissenting Opinion by HARRELL, J., which BELL, C.J. and GREENE, J. join. I dissent.

The Majority opinion, in its parsing and reweighing of the conflicting evidence before the hearing judge, ignores the appellate discipline we are supposed to exercise in our review of the fact-finding process in attorney discipline matters. Even if we would have found differently the operative facts based on the concededly conflicting evidence in this record, that is not our prerogative. The hearing judge, in her written recommendation, characterized the conflicting evidence on the relevant points as follows: ²⁹⁹ responsible for opening office mail, maintaining records of all funds received and disbursed, and preparing bank deposits. Ms. Boulet left the firm in late September [of 2002], and Ms. Terri Anthony assumed her duties.

Ms. Wright left the firm in early October [of 2002] on maternity leave and never returned. ²⁹⁸ The dispute in this matter surrounds the events after September 13, 2002. Mr. Maignan testified that, after speaking with Ms. Lipscomb, he called his associate, Ms. Tesheia Wright, and asked her to check the mail for the settlement proceeds, and then arrange for Ms. Lipscomb to come to the office to complete their transaction. He also asked Ms. Wright to make sure that the office manager, Ms. Sherri Boulet, prepared the deposit for the trust account and the disbursement to Ms. Lipscomb. Ms. Boulet was ²⁹⁹ The parties do not dispute that Respondent’s office received the settlement check dated September 12, 2002, payable jointly to Ms. Lipscomb and Respondent (Petitioner’s Exhibit 4), but do not agree on the date of receipt or deposit of that check.

Petitioner contends that stamps on the reverse of the check, noting “Bank of America, NA” and “September 19, 2002,” show that Respondent or his agent deposited the check on or about that date. Respondent disagrees. Ms. Anthony testified that she discovered the Lipscomb check under or behind a drawer in Ms. Boulet’s desk when she cleaned it out in December 2002, and immediately notified Mr. Maignan. Mr. Maignan testified that he assumed that Ms. Wright had completed the transaction with Ms. Lipscomb in early October 2002, and was upset to learn differently from Ms. Anthony in December.

However, when he examined the check, he realized that Ms. Wright had endorsed the check and signed the release on Ms. Lipscomb’s behalf. Ms. Wright explained that Ms. Lipscomb authorized her to do so. Ms. Lipscomb initially complained that Mr. Maignan failed to communicate with her between October and December 2002 regarding her settlement funds. However, she testified that she had several telephone conversations with his office staff during those months about unrelated matters, but that neither she nor anyone else mentioned the settlement.

Petitioner offers records of Respondent’s bank accounts (Petitioner’s Exhibit 14) to show days on which the available balance fell below the amount due Ms. Lipscomb, before she received her funds. However, the bank records do not evidence deposit of the settlement check until January 2003. ³⁰⁰ Mr. Maignan acknowledges that, by relying on electronic banking services and daily internet reviews of deposit, withdrawal and balance information, his understanding of the status of the firm’s bank accounts differed from the monthly statements issued by the bank. Mr. Maignan testified that the bank’s electronic records credit deposits when received by the bank, but that the monthly statement credits deposits on the date that the funds are actually deposited into the account. Mr. Maignan first learned of this difference from Petitioner’s investigator in February 2003; as a result, he transferred the firm’s accounts to a bank convenient to his office.

Respondent admits that he was alarmed by the belated discovery of Ms. Lipscomb’s settlement proceeds, and directed Ms. Anthony to contact Ms. Lipscomb to arrange prompt delivery of her funds, either in the office or through the mail. Ms. Lipscomb testified that she remembered Ms. Anthony’s call, admitting that she was mistaken when she complained that she knew nothing about the December discovery. Ms. Lipscomb further acknowledged that she asked Ms. Anthony to mail the check to her, because an office appointment would be inconvenient. Mr. Maignan testified that he then executed a check from his general operating account to Ms. Lipscomb, and deposited the settlement check into that account.

He concedes that his actions violate Rule 16-604, requiring that he deposit those funds into the trust account. However, he explained that he wanted to avoid any further delay in transferring the funds to Ms. Lipscomb, which would necessarily occur if he waited for the deposit to clear the trust account before disbursement. However, Ms. Anthony inadvertently misaddressed the envelope, resulting in further delay. A call from Ms. Lipscomb alerted Ms. Anthony to her mistake, and Mr. Maignan directed Ms. Anthony to send another check immediately.

Ms. Anthony testified that she disregarded that instruction and waited for the first letter to be returned by the Postal Service. Ms. Lipscomb finally received her check in early ³⁰¹ February 2003, after initiating this complaint. She testified that she now considers the matter closed, and has no further concern about Mr. Maignan’s representation or his handling of her funds. Based on this factual record, the hearing judge drew the following factual conclusions: Respondent concedes that he did not properly supervise his legal and administrate subordinates’ handling of Ms. Lipscomb’s settlement check.

He assumed that his directions were carried out, and did not verify receipt or disbursement of Ms. Lipscomb’s funds. Further, after discovering the misplaced check, he admits that he failed to deposit the funds into the trust account, as required. However, the evidence does not establish that Mr. Maignan failed to communicate with Ms. Lipscomb. Ms. Lipscomb spoke with Mr. Maignan’s employees several times during the relevant period, but neither she nor anyone else discussed the settlement funds.

Further, scheduling conflicts prevented Ms. Lipscomb from meeting Mr. Maignan in his office. Once the settlement check was discovered, Ms. Lipscomb acknowledges that she simply forgot that she had spoken with Ms. Anthony about the circumstances, and called the office when she did not receive the check as expected. That call resulted in Ms. Anthony’s discovery of the misaddressed mail. Thus, there was no lack of communications between Ms. Lipscomb and Mr. Maignan or other members of his office; rather, the failure to discuss the settlement proceeds resulted from Mr. Maignan’s failure to supervise his subordinates properly.

Moreover, the evidence does not establish that Mr. Maignan misappropriated Ms. Lipscomb’s funds for his own use. Mr. Maignan explained that he deposited the settlement check into his operating account to expedite the transfer to Ms. Lipscomb. Although Respondent’s bank records show some discrepancies between electronic and paper records of balances, Ms. Lipscomb received her funds appropriately after their belated deposit. Thus, Respondent did not misappropriate his client’s funds. ³⁰² Judge Krauser concluded, as recommendations of law, that Respondent’s contentions as to violations of Maryland Rules of Professional Conduct (MRPC) 1.1 and 1.3 were dismissed. 1 , 2 She then concluded that “Petitioner failed to establish that Respondent wrongfully misappropriated Ms. Lipscomb’s funds to his own use or failed to communicate with her;” thus, Respondent did not violate MRPC 1.4, 1.5, 8.1, or 8.4; Maryland Rule 16-606 or 16-607; or Section 10-306 of the Md. Code, Business Occupations and Professions Article.

Nonetheless, the hearing judge resolved that Respondent violated MRPC 1.15(a) 3 and 5.3(a) and (b), 4 as well as Maryland Rule 16-604, stating: Clear and convincing evidence, including Respondent’s admissions, establishes that Respondent failed to supervise the handling of Ms.