Attorney Grievance Commission v. Midlen

⁶³⁰ Opinion by WILNER, J. This is a reciprocal discipline case governed by Maryland Rule 16-773. In April, 2006, Bar Counsel, having learned that, in November, 2005, the District of Columbia Court of Appeals had found that respondent, John Midlen, Jr., violated certain D.C. Rules of Professional Conduct (DCRPC) and had suspended him from the practice of law for a period of eighteen months, filed a petition seeking reciprocal discipline in Maryland. The petition, filed pursuant to Maryland Rule 16-773(b), alleged that, based on the findings of the D.C. Court, Midlen had violated Maryland Rules of Professional Conduct (MRPC) 1.15 (safekeeping property in which a client has an interest), 1.16 (requirements upon termination of representation), and 8.4(a), (c), and (d) (violating other MRPC; engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation that is prejudicial to administration of justice). In accordance with Rule 16-773(c) we issued an order directing the parties to show cause why, based on any of the grounds set forth in Rule 16-773(e), corresponding discipline should not be imposed.

Both parties responded to that order. Mr. Midlen’s principal response was (1) that the suspension by the D.C. Court of Appeals violated his right to due process of law in that the court, by adopting the recommendation of its Board of Professional Responsibility, effectively discarded the factual findings of the Hearing Committee that had been appointed to consider the complaint of the D.C. Bar Counsel, findings which, in Mr. Midlen’s view, were binding on the court, and (2) that the eighteen month suspension conflicted with sanctions imposed by this Court for comparable violations. We find no merit in Midlen’s response, but shall examine the manner in which the reciprocal sanction should be implemented. To address Midlen’s response, it is necessary to understand both the procedure for resolving disciplinary complaints in the District of Columbia and the nature of the charges filed against him in that jurisdiction.

We described the disciplinary ⁶³¹ procedure in the District in Attorney Griev. Comm’n v. Parsons, 310 Md. 132, 138-39, n. 6 , 527 A.2d 325, 328, n. 6 (1987), and it appears from the current D.C. Bar Rules that the procedure there has not changed substantially since then. In addition to Bar Counsel, whose duties are to receive and investigate complaints and prosecute disciplinary proceedings, there are three layers to the disciplinary process — the Court of Appeals itself, at the top, a nine-person Board of Professional Responsibility appointed by the court, and a three-person Hearing Committee appointed by the Board. A disciplinary case is prosecuted first before a Hearing Committee, which is charged with conducting an evidentiary hearing on Bar Counsel’s petition in accordance with rules adopted by the Board.

Within 60 days following the hearing, the Committee submits to the Board a report containing its findings and recommendation, together with a record of its proceedings. If no exceptions are filed to the report, the Board may decide the case on the basis of the Hearing Committee record. If exceptions are filed, the Board schedules the matter for submission of briefs and oral argument. Promptly after oral argument or, if there is no oral argument, after reviewing the Hearing Committee record, the Board may “adopt or modify the recommendation of the Hearing Committee, remand the case to the Hearing Committee for further proceedings, direct Bar Counsel to issue an informal admonition, or dismiss the petition.” D.C.Bar Rule XI, § 9(c).

Unless the Board dismisses the petition, remands the case, or concludes the case by a reprimand or direction for informal admonition, the Board prepares a report containing its findings and recommendation. That report is transmitted to the court. As with the Hearing Committee report, either party may file exceptions to the Board’s report. If exceptions are filed, the court schedules the matter for consideration and enters an appropriate order.

In determining that order, “the Court shall accept the findings of fact made by the Board unless they are unsupported by substantial evidence of record, and shall adopt the recommended disposition of the Board unless to do ⁶³² so would foster a tendency toward inconsistent dispositions for comparable conduct or would otherwise be unwarranted.” D.C. Bar Rule XI, § 9(g). (Emphasis added). The complaint against Mr. Midlen arose from his representation of Jimmy Swaggart Ministries (JSM), which produced and broadcast religious programs on various cable television outlets. Initially through a law firm, Midlen & Guillot (M & G), Midlen was retained by JSM to represent it in the royalty distribution process, under which, pursuant to Federal law, the Librarian of Congress distributes royalties to copyright owners.

As the D.C. Court of Appeals pointed out, the distribution process has two phases. First, royalties are allocated among eight designated claimant groups, one of which was the Devotional Group, of which JSM was a member. In the second phase, payments are allocated to the members of the designated claimant group. If the members of the group agree on an allocation, they sign a settlement agreement specifying the distribution; otherwise, the allocation is litigated.

Though generally eschewing long quotations, we choose to recite the facts underlying the D.C. complaint as stated by the D.C. Court of Appeals, rather than attempt to paraphrase them: “The 1991 retainer agreement between Midlen’s firm and JSM provided that services generally would be billed on an hourly basis and that JSM was expected to make ‘full and prompt payments of the amounts invoiced.’ M & G agreed, however, ‘at least for the 1990 [royalty] claim period, to allow [JSM] to pay only our out-of-pocket expenses until such time as the royalties actually are distributed.’ Once that happened — i.e., when 1990 distribution checks were sent to M & G as escrow agent, see note 3, supra — M & G would ‘deduct the fees incurred as of that date for professional services rendered’ and ‘forward [ ] the balance to [JSM].’ In July 1991, and for each July thereafter until 1997, Midlen filed a claim with the Library of Congress on JSM’s behalf ⁶³³ for royalties earned in the preceding year. In 1992, after deducting its attorney’s fees and expenses from the first distribution for the 1990 claim period, M & G sent the rest of those funds to JSM. In September 1993, M & G sent JSM a second disbursement check for that claim period, pointing out that its legal fees had been deducted from this distribution as well. An accompanying spreadsheet stated that a balance of $10,009.22 was being ‘reserved,’ i.e., not disbursed, by M & G. JSM informed Midlen that it would not consent to M & G holding this ‘reserve’; it reminded him that costs other than out-of-pocket expenses were to be reimbursed to M & G ‘when [royalty] funds are disbursed— not escrowed against.’ JSM said nothing in opposition to the two fee deductions M & G had taken from the distributed funds.

Midlen forwarded the $10,009.22 to JSM. In late 1994, JSM’s Chairman of the Board of Directors, Clyde Fuller, wrote Midlen expressing concern about the amounts being billed in light of the results achieved. Near the end of December 1994, Midlen informed JSM that his legal fees would be deducted from the upcoming 1991 royalty distribution. Although it appeared that JSM owed M & G substantial overdue fees, Fuller objected to the deductions in several phone conversations.

On December 27, 1994, JSM instructed Midlen in writing that ‘no attorneys’ fees are to be withheld from the proceeds. In other words, the entire amount disbursed is to be sent to us and we will, in turn, reimburse your firm when an amount is agreed upon.’ When Midlen objected to these instructions as contrary to the retainer agreement, JSM fired him. 1 Nevertheless, a few days later the claimants in JSM’s group reached a settlement enabling JSM to receive a 1991 distribution, and JSM rehired Midlen — in order, Frances Swaggart of JSM testified, to insure that JSM obtained this money. On or around January 3, 1995, JSM received a ⁶³⁴ distribution from M & G from which Midlen had withheld $20,000 in attorney’s fees and costs. JSM made no objection to this deduction.

In late January 1995, Midlen and Guillot dissolved their partnership and Midlen formed his own law firm. In a letter, he proposed that JSM continue its relationship with him on the same basis as before, and JSM accepted, remaining with him because, as Frances Swaggart testified, ‘his fees were lower than’ Guillot had proposed in similarly offering to represent JSM. At this time, too, JSM raised no questions about Midlen’s deductions of fees from royalty payments or the size of his fees. On August 18,1995, however, Mrs. Swaggart sent a letter to Midlen stating that JSM ‘continued to disagree with [him] concerning [his] billings over the past two years and that the matter must be resolved.’ The letter complained that his last bill was ‘ridiculous’ and directed him to ‘list the hours you work for us plus state the charge per hour.’ It continued: ‘You also know that we do not give and we have not given you permission to deposit any royalties into your account, delete your expenses, and remit the balance to us.

Instead, we have consistently instructed you to send the full amount of royalties received to us and we will remit payment to you. However, that remittance will only be when we feel we are being charged the correct amounts for the work done and your invoices are in the format requested.’ A second letter to Midlen from Barry Miller, an attorney for JSM, in October 1995 reiterated the request that Midlen itemize the hours spent on each daily service referenced in his bills. Miller further expressed his belief that JSM had not authorized Midlen to deduct legal fees directly from royalty disbursements, a practice ‘particularly problematic since there may be a dispute concerning your bills.’ Midlen answered the October letter by proposing different formats for his bills and by reminding Miller of the original engagement letter. ‘Given the Ministry’s payment history,’ Midlen wrote, ‘the one thing that is not negotiable is that I remit ⁶³⁵ anything to JSM while leaving payment of my legal fees to some future agreement and compensation.’ In March and May 1996, Midlen notified JSM that distributions would soon be issued for the 1992 and 1993 claim periods, but that JSM’s share would be insufficient to cover his unpaid legal fees. On multiple occasions after 1996 and through 1997, Midlen received royalties on JSM’s behalf but failed to notify it of the distributions.

This prompted Miller in August 1996 to write to Midlen requesting an accounting, because ‘it appears that you did receive some distributions and that you, without authorization of the Ministries, applied them to payment of your legal fees which we still question.’ In October 1996, Miller again wrote Midlen asking for ‘an accounting of all sums which have been collected to date and the disbursal of such sums.’ A year later in October 1997, Midlen wrote JMS a letter admitting that he had failed so far to provide ‘an accounting for monies received and disbursed since May 1996,’ and promising to furnish one. Another lawyer for JSM, Frank Koszorus, met with Midlen in November 1997 and again asked for an accounting of monies received on JSM’s behalf. In December, when Koszorus repeated the request for a ‘full, detailed and intelligible accounting of the royalty sums,’ Midlen twice replied by admitting that the accounting he owed JSM was not completed. On or about February 9, 1998, JSM terminated Midlen’s services and directed him promptly to deliver all files concerning JSM to Koszorus.

Pointing to unanswered inquiries about its bills, JSM again told Midlen that he was not authorized to withdraw money from the sums held on JSM’s behalf. During February and March 1998, a flurry of correspondence ensued in which JSM asked for the accounting and for its files, and Midlen requested more time to finish the accounting. On April 29, 1998, he sent JSM the final accounting which identified all royalty disbursements JSM had been entitled to and all escrow funds applied to unpaid legal fees from June 1996 to April 1998. Midlen did not turn over the JSM files until months later. ⁶³⁶ Previously, on October 31 and December 30, 1997, Midlen had written himself checks from his escrow account for $6,628.63 and $5,602.32, respectively, to pay down JSM’s outstanding legal fees.

He did not deposit either check until September 1998, after his services had been terminated and he had rendered the final accounting. Altogether, Midlen had disbursed to JSM approximately $341,000 in royalty payments between 1992 and 1997, and paid himself some $123,000 in fees and costs during the same period. (JSM made direct payments to him, ending in 1994, of approximately $52,000). The Board found ‘no evidence on the record that Midlen took more [in attorney’s fees and costs] than was his due.’ ” In re Midlen, 885 A.2d 1280, 1283-85 (D.C.2005).

The Court also recited the facts surrounding Respondent’s handling of an addendum to a settlement agreement between the Devotional Claimants: “In October of 1997, Midlen informed JSM that it was necessary to amend the Devotional Claimants’ 1992-93 Settlement Agreement because one of the other claimants had failed to file a claim in the royalty proceeding. In a fax to JSM on November 12, Midlen reported on the status of this proceeding and attached a proposed draft Addendum. On November 14, JSM informed Midlen that it needed time to review the matter and that Midlen was not authorized to execute or sign any document on its behalf until JSM informed him of its decision. Midlen offered to answer any questions regarding the Addendum.

He also reminded JSM that the Addendum did not make any substantive changes to the earlier agreement. Thereafter, JSM advised Midlen that Frank Koszorus would be contacting him regarding the Addendum and reminded him that ‘the directives given to you in our letter of November 14, 1997, are still in effect.’ Midlen met with Koszorus, who indicated that he understood the Addendum and did not have any questions for Midlen. On December 12, Midlen forwarded the final version of the Addendum to JSM and advised it that the final version would go forward the ⁶³⁷ following week. The same day, Reverend (Jimmy) Swaggart responded to this letter, advising Midlen that he could only execute the Addendum for JSM ‘when you have authorization in writing to do so from myself or Frances — not before.’ The next day, Midlen replied to this letter noting that Koszorus had not raised any objections to the Addendum and that JSM had not raised any specific problems or questions.

Midlen’s letter did not advise JSM that he intended to execute the Addendum over JSM’s objection. Midlen executed the Addendum on December 16, 1997. Shortly, thereafter, Midlen received a letter from Koszorus, dated December 16, reiterating JSM’s directive that Midlen was not to execute the Addendum without written permission from JSM. Midlen neither replied to this letter nor took action to withdraw JSM’s assent to the Addendum.

JSM did not learn that Midlen had executed the Addendum until April 1998.” Id. at 1291 . The operative complaint was filed in April, 1998, by Frances Swaggart, on behalf of JSM. In that complaint, Ms. Swaggart contended that she had filed an earlier complaint in 1997, of which D.C. Bar Counsel had no record, in which she had complained that Midlen had failed to provide JSM with an accounting of funds collected on JSM’s behalf, that he failed to provide JSM with “understandable legal bills,” and that he had entered into agreements concerning royalty payments without JSM’s knowledge and consent. Neither the 1998 complaint nor Ms. Swaggart’s description of the earlier one alleged any particular fee dispute between JSM and Midlen.

Upon the complaint filed by Ms. Swaggart, D.C. Bar Counsel, on December 1, 2000, filed a petition and specification of charges, contending that Midlen had violated the following DCRPC: Rule 1.3(c), in that Respondent failed to act with reasonable promptness in representing the client; Rule 1.4(a), in that Respondent failed to keep his client reasonably informed about the status of the matter and ⁶³⁸ failed to promptly comply with reasonable requests for information; Rule 1.4(b), in that Respondent faded to explain the matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation; Rule 1.7(b) & (c), in that Respondent engaged in a likely conflict of interest and failed to provide full disclosure to his client regarding his representation of another client with adverse interests; Rule 1.15(a), in that Respondent failed to keep complete records of accounts maintained in connection with the representation; Rule 1.15(b), in that Respondent failed to promptly notify his client upon receiving funds in which the client had an interest, failed to promptly deliver the funds to his client, and failed to promptly provide a full accounting regarding such funds to the client; Rule 1.15(c), in that Respondent failed to keep separate from his own funds the disputed portion of the funds in which he and the client had an interest; Rule 1.16(a)(3), in that Respondent continued to represent the client after Respondent had been discharged; Rule 1.16(d), in that Respondent failed to take timely steps to the extent reasonably practicable to protect the client’s interest, by failing to surrender papers and property to which the client was entitled; and Rule 8.4(c), in that Respondent engaged in conduct involving dishonesty, fraud, deceit, or misrepresentation. In accordance with the D.C. disciplinary procedure, upon Midlen’s denial of Bar Counsel’s averments, the matter was referred to a Hearing Committee, which conducted a four-day evidentiary hearing. Nine witnesses, including Midlen, testified, and more than 200 exhibits were placed in evidence. Bar Counsel and Midlen submitted proposed findings of fact and conclusions of law.

On October 30, 2002, the Committee filed a 67-page Report and Recommendation, in which it concluded that Midlen had violated DCRPC 1.15(b) “for his failure to ⁶³⁹ provide a prompt accounting to his client of funds held on behalf of the client,” but that Bar Counsel had not sustained her burden of proof with respect to any of the other charges. In support of those ultimate conclusions, the Hearing Committee made 132 specific findings of fact and discussed at some length the various charges. We need consider only two, beyond the Rule 1.15(b) violation — misappropriation arising from Midlen’s withdrawal, on seven occasions between January 3, 1995 and December 30, 1997, of an aggregate of $49,000 from his IOLTA account for fees, and the claim that he had acted dishonestly when, in December, 1997, he signed, on behalf of JSM, an addendum to the 1992-93 settlement agreement among the Devotional claimants. With respect to the claim of misappropriation based on Midlen’s withdrawal of funds he regarded as earned fees, the Hearing Committee concluded, first, that Bar Counsel had not actually charged Midlen with “misappropriation” and it therefore disregarded any suggestion that he had engaged in such conduct.

The Committee did, then, proceed to rule on the underlying basis of a misappropriation charge by concluding that Midlen was authorized to make the withdrawals. That conclusion rested to a large extent on the Committee’s findings that (1) notwithstanding earlier objections about Midlen’s deducting fees from royalty distributions, JSM made no objection when, in January, 1995, Midlen withheld $20,000 from a distribution and explained that the withholding was for attorneys’ fees; (2) in February, 1995, when M & G dissolved, JSM hired Midlen and again raised no question about his deduction of fees from the cable royalty distribution; (3) notwithstanding correspondence back and forth regarding Midlen’s invoices, by the end of 1996, Midlen believed, with ample reason, that JSM had resolved whatever questions it had about his fees and billing format; and (4) that in the alleged complaint JSM filed in April, 1997, which Bar Counsel never received, no dispute was claimed with respect to fees. Although the Hearing Committee found that there had been fee disputes between JSM and Midlen, it noted that “[h]ere JSM appeared to withdraw its dispute and thus to allow ⁶⁴⁰ [Midlen] to follow the practice agreed upon throughout his representation of JSM — that he could withdraw his fees from the cable royalty distributions.” It thus concluded that “the fees were no longer disputed when [Midlen] withdrew them.” For the Rule 1.15 violation that it found, the Hearing Committee recommended an informal admonition. Bar Counsel filed an exception to the Hearing Committee’s report — to its conclusion that she had failed to meet her burden of proof with respect to the other alleged violations and to the recommended sanction.

After a review of the entire record, the Board of Professional Responsibility, on July 15, 2004, rendered its own 77-page Report to the D.C. Court of Appeals. The Board sustained the Hearing Committee’s finding that Midlen had violated DCRPC 1.15(b) and concluded further that Bar Counsel had not pursued her alleged violations of DCRPC 1.3(c) and 1.15(b) regarding record-keeping. The Board departed significantly, however, from the Hearing Committee’s findings with respect to some of the other alleged violations, noting that its departure “reflects, in our view, a dispassionate reassessment of the entire record.” In that regard, the Board concluded that Midlen had violated: (1) DCRPC 1.15(c) “by misappropriating client funds by failing to keep separate from his own funds the disputed funds in which he and his client had an interest”; (2) DCRPC 1.4(a) and (b) “by failing to respond to requests for information regarding the fees [Midlen] withdrew from his client’s disbursements and by failing to inform his client that he executed a settlement”; (3) DCRPC 1.16(d) “by failing to take reasonable steps to protect his client’s interest upon termination of the representation, failing to turn over the client’s file and by failing to provide a prompt accounting”; and (4) DCRPC 8.4(c) “by engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation.” ⁶⁴¹ The Board sustained the Hearing Committee’s findings that Bar Counsel had failed to sustain her burden of proof with respect to the other alleged violations. Relying on Board Rule 13.7 and In re Micheel, 610 A.2d 231, 234 (D.C.1992), the Board noted that the Hearing Committee’s findings of fact will be affirmed “when supported by ‘substantial evidence on the record as a whole’” but, citing several cases from the D.C. Court of Appeals, held that it owed no deference to the Committee’s determination of “ultimate facts,” such as “whether the facts establish a violation of a Rule, and other conclusions of law.” The Board observed that, although the Hearing Committee’s findings of fact were “largely supported by the record,” it had (1) revised and reorganized some of them for ease in evaluating the violations at issue, (2) added some findings, supported by the record, necessary for a conclusion of law, (3) eliminated certain findings “that are unnecessary to any determination of the outcome,” (4) eliminated certain “commentary” from the Committee’s findings that “fails to advance the analysis of this matter,” and (5) in a few instances, revised or deleted findings that “are not supported by substantial evidence in the record.... ” Those changes, the Board added, were based on documentary evidence and were made mindful of the deference owed to the Committee’s findings.

The Board recognized, as had the Hearing Committee, that the major dispute between the parties concerned whether Midlen had authority to withhold his fees from the royalty