Attorney Grievance Commission v. Sapero

GREENE, J. The Attorney Grievance Commission of Maryland (“Petitioner”), by Bar Counsel acting pursuant to Maryland Rule 16-751, 1 filed a Petition For Disciplinary or Remedial Action in the Court of Appeals against Robert A. Sapero (“Respondent”). The Petition alleged that Respondent, who was admitted to the Bar of this Court on November 19, 1964, violated Rules 1.5 (Fees), 2 1.15 (Safekeeping ⁴⁶⁴ Property), 3 8.1 (Bar Admission and Disciplinary Matters), 4 and 8.4 (Misconduct) 5 of the Maryland Rules of Professional Conduct (“MRPC”). Pursuant to Maryland Rule 16-752(a), 6 we referred the matter to the Honorable Martin P. Welch, of the Circuit Court for Baltimore City, to conduct an evidentiary hearing and render findings of fact and recommend conclusions of law. On February 12, 2006, Judge Welch held a ⁴⁶⁵ hearing and on March 29, 2007, issued Findings of Fact and Conclusions of Law, in which he found that Robert A. Sapero had violated MRPC 1.15(a), 1.15(c), and 8.1(b).

I. FACTUAL FINDINGS AND CONCLUSIONS OF LAW FINDINGS OF FACT After an evidentiary hearing, Judge Welch made the following factual findings and conclusions of law: 1. The Respondent was admitted to the Bar of Maryland on November 19,1964, and has maintained an office for the general practice of law in Baltimore City. 2. That on or about February 15, 2006, the Attorney Grievance Commission, pursuant to Maryland Rule 16-743(f), directed Bar Counsel to file charges against the Respondent and said direction was received by Bar Counsel on or about February 21,2006. 3. The Respondent represented Alston J. Andrews and his wife in connection with claims arising out of an automobile accident, involving Mr. Andrews, which occurred in April 2000.

The Respondent’s fee was contingent upon the outcome of the case. 4. The claims arising out of the accident were settled in or about October 2002. 5. The settlement included $629,516.00, which funded a structured settlement by way of an annuity providing periodic payments to Mr. Andrews and periodic payments toward Respondent’s fee. 6. A copy of the letter of transmittal, explaining the check, was promptly furnished to the client by the Respondent. 7.

A second insurance company check for $295,484.00 was paid on or about November 7, 2002. These latter funds were deposited in the escrow account by request of Mr. Andrews and were to be kept safe by Respondent for the use of Mr. Andrews and/or his wife as ⁴⁶⁶ might be requested, and for the payment of medical bills. 8. A complaint against Mr. Sapero was filed with the Petitioner which alleged that the Respondent had not handled his clients’ funds appropriately. The complaint purported to be signed by Mr. Andrews but Mr. Andrews stated that the signature was not his and that he was quite satisfied with the Respondent’s representation.

It turned out the complaint was signed by a family member, whose allegations Mr. Andrews repudiated. 9. Bar Counsel’s investigation revealed that the Respondent maintained the funds in trust properly and consistent with his fiduciary responsibilities. 10. The Respondent did not provide his clients with a written statement indicating the outcome of the matter showing the remittance to the client and the method of its determination until on or about January 17, 2006, more than three years after the case was settled [Exhibit 10, Admissions], although an interim statement was provided under date of December 8, 2005. The January 17, 2006, statement updated the earlier interim statement. 11.

The Petitioner, while investigating the complaint, determined that the Respondent maintained significantly more funds in his trust account than he should have had for the benefit of Mr. and Mrs. Andrews and his other clients. 12. The Petitioner determined that the overage was caused by the Respondent’s failure to remove earned fees from his account on several occasions between 1991 and 2005, a period during which he delegated the record keeping of his escrow account to a succession of employees. 13. After the Petitioner’s investigation of the Respondent’s trust account was concluded, the Respondent, on or about January 18, 2006, removed from his escrow ⁴⁶⁷ account all the unearned fees as well as funds associated with checks which had not been negotiated. 14. The Respondent took other remedial steps set forth infra. 15.

The following earned fees were not withdrawn timely from the Respondent’s trust account: a. December 1991, $2,000.00 b. June 1993, $5,166.00 c. February and August 1996, fees totaling $3,116.66 d.

August 1997, $22,330.00 e. April 2001 and June 2002, fees totaling $1,442.75 16. Commingling of the Respondent’s funds with those of his clients over a period of [sic] excess of thirteen years was caused by the Respondent’s poor record keeping and his failure to reconcile his trust account on a regular basis. This was the conclusion of the certified public accountant engaged by the Respondent to reconcile and remediate the Respondent’s escrow account. 17.

As a result of the Respondent’s failure to adequately maintain the records of his trust account, he filed state and federal personal income tax returns which were inaccurate with respect to his income. However, the Respondent generally overpaid his estimated taxes during the years he failed to remove his fees from trust. 18. The estimated taxes were in amounts more than sufficient to cover his tax liability for the fees not withdrawn from his escrow account. The Respondent received credit for such overpayments. 19.

There is no clear and convincing evidence that the Respondent intentionally failed to report earned income to the taxing authorities. 20. The Respondent filed amended tax returns in September 2006 which set forth additional income for the five tax years in which income was earned and not withdrawn from escrow. He paid a total of $12,071.00, representing his tax liability and $1,681.00, representing his state tax liability. ⁴⁶⁸ 21. After the Petitioner filed its Statement of Charges in this matter, the Respondent engaged the accounting firm of KAWG & F to ascertain (1) the amount by which his escrow account exceeded the total amount of client funds he held in escrow and (2) the sources and causes of the overage. 22.

The accountants reviewed the file in every case settled between 1990 and 2003, some three hundred in all, and compared the settlement sheets, checks and bank statements regarding every transaction within the escrow account, thereby completing a full reconciliation. The Respondent paid the accounting firm over $28,000 for the services it provided over a period of four to five months which provided the information requested by Bar Counsel. 23. The Respondent has further revised his office procedures with respect to the maintenance of this trust account and client files by engaging as an associate Kathleen M. O’Connell, Esquire, who, with the assistance of Respondent’s CPA, has set up and maintained a Quickbooks accounting file with controls that enable Respondent to account for all of the funds in his escrow account by client. 24. The system at any given time will run a report that will show the total expensed [sic] that have been paid for any particular client as of a specified date, and the net balance held in escrow for the client. 25.

The bank balance of the escrow account is reconciled on a current basis with the grand total for the Quickbooks report. At the time a client’s case is closed, a settlement sheet is presented to the client and a signed copy is retained in the client’s file. 26. The net proceeds, after all expenses, are disbursed as Respondent and the client agree. Entries are made in the system contemporaneously with the event to be recorded, and Respondent, himself, regularly reviews the Quickbooks system’s reports. 27.

In the course of the investigation of the complaint, Petitioner sought information from the Respondent. Respondent submitted a written response on May 2, 2005. ⁴⁶⁹ 28. On May 27, 2005, Deputy Bar Counsel forwarded a letter to the Respondent requesting a settlement sheet with respect to the Andrews’ case and an accounting for the medical bills. 29. Respondent telephoned Petitioner’s investigator, Marc Fiedler, several times, but no written response was forthcoming.

An additional request was made on June 24, 2005. When no substantive response was forthcoming, a subpoena was issued on August 5, 2005, and said subpoena was served on Respondent on August 9, 2005. 30. The subpoena required the Respondent to produce records associated with his trust account and the Andrews’ case on August 30, 2005, at the office of the Bar Counsel. The Respondent did not comply with the subpoena. 31.

On or about September 1, 2005, the Respondent telephoned Mr. Fiedler and explained that he was unable to produce the subpoenaed documents on the date requested. 32. On or about September 7, 2005, the Respondent produced to Mr. Fiedler, in response to the subpoena, a box of unorganized documents from which Mr. Fiedler could not within a reasonable time extract the requested information or determine if the information could be extracted from the records presented. 33. During Bar Counsel’s investigation, Respondent was a sole practitioner with an extensive litigation and general practice. 34. The Respondent’s response to Bar Counsel’s request for information was dilatory, although he never refused to produce, and never denied access to, any information he had. 35.

Respondent’s failure to timely respond to Bar Counsel’s request for information was primarily caused by his inability to extract information from his disorganized files and trust account records, but he did not explain to Bar Counsel’s office the particular difficulties he was experiencing garnering the information sought. ⁴⁷⁰ 36. At the hearing, the Respondent stated that in the case of another client, he did not remove earned fees from his escrow account for the prophylactic purpose of covering outstanding medical bills for plastic surgery, should they arise. He was prepared to reduce his fee or for go [sic] a portion of his fee to allow that client the ability to have plastic surgery. (Uncontradicted testimony of the Respondent.) CONCLUSIONS OF LAW Maryland Lawyers’ Rules of Professional Conduct 1.5(c) Fees The Respondent is alleged to have violated M.R.P.C. 1.5(c) by failing to provide the client with a written statement indicating the outcome of the case, show remittance to the client, and indicate the method of its determination upon conclusion of the matter.

Maryland Rule of Professional Conduct 1.5(c) provides that: “A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (d) or other law. A contingent fee agreement shall be in a writing signed by the client and shall state the method by which the fee is to be determined including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal; litigation and other expenses to be deducted before or after the contingent fee is calculated. The agreement must clearly notify the client of any expenses for which the client will be responsible whether or not the client is the prevailing party. Upon conclusion of a contingent fee matter, the lawyer shall provide the client with a written statement stating the outcome of the matter, and, if there is a recovery, showing the remittance to the client and the method of its determination.” ⁴⁷¹ Bar counsel contends that though the Respondent provided an interim statement to his client, the Respondent’s failure to provide the client with a written statement indicating the outcome of the case, show remittance to the client, and indicate the method of its determination upon conclusion of the matter violated M.R.P.C. 1.5(c).

The Respondent contends that the obligation to provide a written statement arises only “upon conclusion of a contingent fee matter.” The Respondent argues that the “matter” in his client’s case continued to be active, after the personal injury claim was settled, because substantial medical bills were being contested and escrowed funds were being held. The Respondent states that the escrowed funds were being held with the client’s consent pending the outcome of the contested medical bills. The Respondent did provide interim statements in December 2005 and January 2006 while the medical bills continued to be contested. The Respondent argues further, based on interim statements, that he kept the client “fully apprised of the status of his matter as the matter progressed.” In addition, the Respondent argues that M.R.P.C. 1.5(c) does not specifically define “conclusion of a contingent fee matter” and, as such, the ambiguity of M.R.P.C. 1.5(c) in its interpretation of “matter” should, therefore be “resolved in favor of the Respondent.” (Respondent’s proposed findings of fact and conclusions of law, p. 3.) This Court finds that though M.R.P.C. 1.5(e) required the Respondent to provide a written statement (1) stating the outcome of a contingent fee matter and (2) showing the remittance to the client and method of its determination, the Respondent could not do both until the case had concluded.

The Respondent may have been able to provide a statement as to the outcome, but was unable to show the remittance and method of its determination because of the substantial contested medical bills. The matter had not been concluded. Without the resolution of the substantial medical bills, any statement would be inaccurate as to the showing of the remittance and its determination. The two interim state ⁴⁷² ments provided by the Respondent to the client are an indication of the Respondent’s attempt to comply with the Rule, even though a statement fully complying with the Rule was not provided until January 17, 2006.

For these reasons, the Court finds that the Respondent did not violate M.R.P.C. 1.5(c). Maryland Lawyer’s Rule of Professional Conduct 1.15(a) Safekeeping Property The Respondent is alleged to have violated M.R.P.C. 1.15(a) by failing to remove earned fees, thereby commingling his funds with those of his clients and failed to regularly reconcile his escrow account. Maryland Rules of Profession Conduct 1.15(a) provides that: “(a) A lawyer shall hold property of clients or third persons that is in 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.

Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and of other property shall be kept by the lawyer and shall be preserved for a period of five years after the termination of the representation.” Bar Counsel contends that the Respondent failed to remove earned fees from his trust account between 1991 and 1995,1[ 7 ] thereby commingling his own funds with those of his clients. In failing to remove his earned fees in his trust account, Bar Counsel contends that the Respondent violated M.R.P.C 1.15(a). Attorney Griev.

Comm’n v. Zuckerman, 386 Md. 341, 370 , 872 A.2d 693, 710-711 (2005); Attorney ⁴⁷³ Griev. Comm’n v. Sliffman, 330 Md. 515, 526 , 625 A.2d 314, 319 (1993). The Respondent contends that: (1) the Respondent’s failure to withdraw fees timely from his escrow account was not motivated by any desire for personal advantage, (2) the largest fee, not promptly withdrawn, was left in the account in order to benefit the client, in accordance with Respondent’s agreement to contribute as much of his fees as would be necessary toward the cost of further surgery, and when Respondent ascertained that there would be no further surgery, the $22,330.23 was withdrawn. (Respondent’s Findings of Fact and Conclusions of Law, p. 2 and ¶ 36.) This Court finds that the Respondent’s conduct did violate M.R.P.C. 1.15(a), by commingling funds when he failed to remove earned fees.

However, the failure to remove the earned fees was explained as resulting from the Respondent’s poor record keeping. The evidence indicates that the Respondent lacked any desire to benefit personally in failing to remove the earned fees. There is no evidence that the Respondent’s failure to remove earned fees from the trust fund was intentional and motivated by “fraud, dishonesty, or deceit.” Attorney Griev. Comm’n v. Awuah, 346 Md. 420 , 697 A.2d 446 (1997).

Further, Bar Counsel concedes that a certified public accountant, engaged by the Respondent to reconcile and remediate the Respondent’s escrow account, concluded that the commingling of the Respondent’s funds with those of his over a period in excess of thirteen years was caused by the Respondent’s poor record keeping and his failure to reconcile his trust account on a regular basis. Bar Counsel concedes further that on or about January 18, 2006, the Respondent removed from his escrow account earned fees as well as funds and non-negotiated checks. Ultimately, Bar Counsel’s investigation revealed that the Respondent maintained the funds in trust properly and consistent with his fiduciary responsibility. (Plaintiffs Exhibit, p. 2.) ⁴⁷⁴ For these reasons, the Court finds that the Respondent did violate M.R.P.C. 1.15(a), but was an unintentional violation.

Maryland Lawyer’s Rules of Professional Conduct 1.15(c) Safekeepiny Property The Respondent is alleged to have violated M.R.P.C. 1.15(c) by commingling his funds with those of his clients without written consent. Maryland Rules of Professional Conduct 1.15(c) provides that: “[UJnless the client gives informed consent, confirmed in writing, to a different arrangement, a lawyer shall deposit into a client trust account legal fees and expenses that have been paid in advance, to be withdrawn by the lawyer only as fees are earned or expenses are incurred.” Bar Counsel and the Respondent concede that the Respondent “deposited funds in the escrow account by request of Mr. Andrews and were to be kept safe by Respondent for the use of, his client, Mr. Andrews and/or his wife, as might be requested, and for the payment of medical bills.” (Plaintiff’s Exhibit, p. 1.) In addition, a second insurance check was deposited into Respondent’s trust account. Mr. Andrews’ request can be interpreted as the informed client consent, although not confirmed in writing, which indicated a different arrangement between the Respondent and the client. (Plaintiffs Exhibit, p. 2.) The Respondent contends that while the Respondent left the earned fees in the escrow account, the failure to remove the fees were, at most, the result of the Respondent’s inadvertence to remove the fees.

There was no evidence that the Respondent was motivated by a desire for personal gain and did not lead to the ultimate consequences that the Rule is in place to prevent. (Respondent’s Proposed Findings of Fact and Conclusions of Law, p. 2.) The Court finds that the Respondent did not remove earned fees in a timely manner from the trust account, as ⁴⁷⁵ they were earned and as required by M.R.P.C. 1.15(c), thereby violating M.R.P.C. 1.15(c). In addition, there is no evidence that the client gave his written consent, as required by the Rule, to allow the Respondent to leave his earned fees in the client’s account. However, the client requested the Respondent to keep funds for the payment of medical bills.

Further, the Respondent did take remedial steps and, eventually, removed from his escrow account all the earned fees as well as funds associated with checks, which had not been negotiated. (Plaintiffs Exhibit, p. 2.) There is no evidence that the Respondent’s failure to remove the earned fees, in a timely manner, was motivated by personal gain or resulted in financial harm to the client. For these reasons, the Court finds that the Respondent did violate M.R.P.C. 1.15(c), but was an unintentional violation. Maryland Lawyer’s Rules of Professional Conduct 8.1(b) Bar Admission and Disciplinary Matters The Respondent is alleged to have violated M.R.P.C. 8.1(b) by failing to disclose a fact necessary to correct a misapprehension known by the person to have arisen in the matter, or knowingly failing to respond to a demand for information from a disciplinary authority.

Maryland Rules of Professional Conduct 8.1(b) provides that: “[A] lawyer in connection ... with a disciplinary matter shall not (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 admission or disciplinary authority, except that this Rule does not require disclosure of information otherwise protected by Rule 1.6.” Bar Counsel contends that the Respondent’s failure to respond to Bar Counsel’s request for information, despite explanation in the stipulated facts, provides evidence that the Respondent was “knowingly derelict.” Attorney Griev. ⁴⁷⁶ Comm’n v. Fezell, 361 Md. 234, 249-250 , 760 A.2d 1108, 1116 (2000); Attorney Griev. Comm’n v. Bridges, 360 Md. 489 , 759 A.2d 233 (2000). The Respondent contends that on May 2, 2005, the Respondent, by a letter to Bar Counsel, answered the complaint that led to Bar Counsel’s investigation. In Respondent’s letter to Bar Counsel, the Respondent explained that there are “substantial additional escrow funds allocated to medical bills ... some of which have been negotiated and settled, and others which are pending settlement negotiations.

This may possibly result in additional funds which would be provided to Mr. Andrews when and if there is a residue.” (Plaintiffs Exhibit, Mr. Sapero’s letter to Bar Counsel.) The Court finds that the Respondent, upon investigation, telephoned the Bar Counsel investigator, Marc Fiedler several times but failed to provide a written response. The Respondent’s failure to provide a written response, caused the Petitioner to issue a subpoena requiring the Respondent to produce records associated with his trust account and the Andrew’s, his client’s, case, in which the Respondent did not comply timely with the subpoena. The Respondent telephoned the Bar Counsel investigator and explained that he was unable to produce the subpoenaed documents by the date requested. Six days later, the Respondent produced to the investigator a box of unorganized documents from which the investigator could not in a timely manner extract the requested information or determine if the information could be extracted from the records presented.

(Plaintiffs Exhibit, p. 4.) The Respondent’s response to Bar Counsel’s request for information was dilatory, although he never refused to produce, and never denied access to, any information he had. (Plaintiffs Exhibit, p. 4.) Both parties concede that the primary reason for the Respondent’s failure to timely respond to Bar Counsel’s request was caused by his inability to extract information form his disorganized files and trust account records. (Plaintiffs Exhibit, p. 5.) ⁴⁷⁷ For these reasons, the Court finds that the Respondent did violate M.R.P.C. 8.1(b). Maryland Lawyer’s Rules of Professional Conduct 8.4(d) Misconduct The Respondent is alleged to have violated M.R.P.C. 8.4(d) by engaging in conduct that is prejudicial to the administration of justice.

Maryland Rules of Professional Conduct 8.4(d) provides that: “[I]t is professional misconduct for a lawyer to (d) engage in conduct that is prejudicial to the administration of justice.” Bar Counsel contends that the Respondent failed to report earned income due to the Respondent’s failure to remove earned fees. Both Bar Counsel and the Respondent concede that there is “no clear and convincing evidence that the Respondent intentionally failed to report earned income to the taxing authorities.” (Plaintiffs Exhibit, p. 3.) Bar Counsel’s investigation revealed that Mr. Sapero’s estimated taxes were sufficient to cover his tax liability for the earned fees that were not withdrawn from the escrow account. (Plaintiffs Exhibit, p. 3.) Bar Counsel and the Respondent concede that the initial complaint that alleged the Respondent’s misconduct in handling his client’s funds, and thereby triggering Bar Counsel’s investigation, was purported to be signed by Mr. Andrews, the client. Bar Counsel and the Respondent conceded that it was later revealed that Mr. Andrews’ signature was forged on the complaint and that Mr. Andrews was quite satisfied with the Respondent’s representation (Plaintiffs Exhibit, p. 1.) The Court finds that the Respondent’s failure to report earned income by not withdrawing his funds from the escrow account did not impose any tax liability because he sufficiently overestimated taxes.

The Court further finds that the genesis of this complaint was pursuant to a forged ⁴⁷⁸ signature of the client (Alston J. Andrews) and the client is satisfied with the Respondent’s representation. For these reasons, the Court finds that the Respondent did not violate M.R.P.C. 8.4(d).

II

STANDARD OF REVIEW This Court has original and complete jurisdiction over attorney disciplinary proceedings. Attorney Grievance Comm’n v. Cherry-Mahoi, 388 Md. 124, 152 , 879 A.2d 58, 76 (2005) (citations omitted). As noted in Attorney Grievance Comm’n v. Mahone, 398 Md. 257, 265-66 , 920 A.2d 458, 463 (2007): We accept a hearing judge’s findings of fact unless we determine that they are clearly erroneous. Attorney Grievance Comm’n v. Guida, 391 Md. 33, 50 , 891 A.2d 1085, 1095 (2006).

As to the scope of our review, we take into consideration whether the findings of fact have been proven by the requisite standard of proof set out in Rule 16-757(b). This Rule provides that Bar counsel has the burden of proving the averments of the petition by clear and convincing evidence, and the attorney who asserts an affirmative defense or a matter of mitigation or extenuation has the burden of proving the defense or matter of mitigation or extenuation by a preponderance of the evidence. Guida, 391 Md. at 50-51 , 891 A.2d at 1095 (citing Rule 16-757(b)). “Weighing the credibility of witnesses and resolving any conflict in the evidence are tasks proper for the fact finder.” State v. Stanley, 351 Md. 733, 750 , 720 A.2d 323, 331 (1998). With regard to the hearing judge’s conclusions of law, our review is de novo.

Attorney Grievance Comm’n v. Harrington, 367 Md. 36, 49 , 785 A.2d 1260, 1267-68 (2001).

III

DISCUSSION In this case, the hearing judge concluded that Respondent violated Rules 1.15(a) and (c), and 8.1(b). Pursuant to Md. ⁴⁷⁹ Rule 16-758, 8 either party may file post-hearing written exceptions to the findings and conclusions of the hearing judge. Specifically, Maryland Rule 16—759(b)(2)(B) provides: (B) If exceptions are filed. If exceptions are filed, the Court of Appeals shall determine whether the findings of fact have been proven by the requisite standard of proof set out in Rule 16-757(b).

The Court may confine its review to the findings of fact challenged by the exceptions. The Court shall give due regard to the opportunity of the hearing judge to assess the credibility of witnesses. Petitioner excepts to the hearing judge’s statement that “Respondent’s failure to report earned income by not •withdrawing his funds from the escrow account did not impose any tax liability because he sufficiently overestimated taxes.” According to Petitioner, the trial judge’s finding was erroneous and inconsistent with his finding that when “Respondent overpaid his estimated taxes, he received credit for such overpayment.” Specifically, the hearing judge found that there was a tax liability which Respondent paid: “$12,071.00, representing his [federal] tax liability and $1,681.00, representing his state tax liability for income earned but not withdrawn from escrow.” We agree that it was inconsistent for the hearing judge to state that Respondent’s failure to report earned income did not impose any tax liability. Clearly, Respondent’s receipt of earned income imposed a tax liability, notwithstanding the fact that he overpaid his estimated taxes.

See Attorney Grievance Comm’n v. Sliffman, 330 Md. 515, 526 , 625 A.2d 314, 319 (1993) (noting that ordinarily attorney fees must be reported in the year in which they are earned). Considering the fact that Respondent’s amended 2006 tax returns addressed the tax liability for the unreported ⁴⁸⁰ fees left in his trust account, it appears that the hearing judge’s