Attorney Grievance Commission v. Webster

BATTAGLIA, J. The Attorney Grievance Commission of Maryland (“Petitioner”), acting through Bar Counsel and pursuant to Maryland Rule 16-751(a), 1 filed a Petition For Disciplinary or Remedial Action against Respondent, Arthur D. Webster, on January 31, 2007. Bar Counsel alleged that Respondent violated Maryland Rules of Professional Conduct (“MRPC”), 1.1 (Competence), 2 1.3 (Diligence), 3 1.4 (Communication), 4 ⁴⁵⁴ 1.5(b) (Fees), 5 1.15(a) (Safekeeping Property), 6 1.16(d) (Declining or Terminating Representation) 7 and 8.4(a), (c) and (d) (Misconduct). 8 The charges involved Respondent’s represen ⁴⁵⁵ tation of Rosie Edwards from 2004 through 2006 and Sheila Polk in 2006. In accordance with Maryland Rules 16-752(a) and 16-757(c), 9 we referred the petition to Judge W. Newton Jackson, III of the Circuit Court for Wicomico County for an evidentiary hearing and to make findings of fact and conclusions of law. Judge Jackson held a hearing on June 8, 2007, and issued Findings of Fact and Conclusions of Law on July 3, 2007, in which he concluded by clear and convincing evidence that in the Edwards matter, Respondent had violated MRPC 1.15(a), 1.16(d) with respect to $630 that Respondent had received representing a filing fee for a conversion to a Chapter 11 bankruptcy proceeding, and 8.4(a), (c) and (d), and had violated MRPC 1.1, 1.3, 1.4, 1.16(d) and 8.4(d) in the Polk matter.

Judge Jackson did not conclude that there were violations of MRPC 1.5(b), nor of MRPC 1.16(d) with respect to a $3,000 retainer in the Edwards matter, nor of MRPC 8.4(a) and (c) in the Polk matter: Opinion “Petitioner alleges professional misconduct on the part of Respondent. A hearing was held on 8 June 2007. Glenn M. Grossman represented Petitioner; Andrew Jay Graham appeared for Respondent. Testifying were Rosie Edwards (via videotape), Respondent himself, William Handy and Barton Gold, the last two being essentially character witnesses.

Various exhibits were admitted into evidence, in- ⁴⁵⁶ eluding Petitioner’s request for admission of facts and genuineness of documents and Respondent’s response thereto. “Petitioner’s allegations pertain to two of Respondent’s clients, Rosie Edwards and Sheila Polk. Each will be treated separately herein. Rosie L. Edwards Findings of Fact “In September 2004, Ms. Edwards hired Respondent because of financial difficulties involving a daycare center on church property operated by her as pastor. Ms. Edwards had already filed a pro se Chapter 7 bankruptcy on behalf of the church, and Respondent advised her to convert the Chapter 7 to Chapter 11.

To that end, on 23 September 2004, Ms. Edwards gave Respondent a personal check postdated to 29 September 2004 in the amount of $630. The words “conversion fee/Chapter 11” appear in the memorandum portion of the check. “Simultaneously, Ms. Edwards paid a fee of $3,000 by way of a bank check to Respondent, who told her that he expected the total cost of the representation to be in the $10,000-$15,000 range for the Chapter 11. No retainer agreement was executed by Ms. Edwards. “Respondent placed the funds from the two checks into his general operating account, which he used for general business purposes. Even though Ms. Edwards’ personal check contained the notation “conversion fee,” Respondent did not place those funds in trust.

He did not use them for the purpose for which they were given him. “Ms. Edwards assumed that Respondent had effected the conversion. In fact, Respondent did not convert the Chapter 7 bankruptcy to Chapter 11, because it became evident to him that Ms. Edwards was unable or unwilling to make the necessary periodic payments. Instead, he decided that a “re-write” of the existing bank loan against the property was the best course of action. In that regard, he contacted the bank’s president and its attorney, but these negotiations ⁴⁵⁷ bore no fruit.

He then advised her that a sale of the property was necessary. Ms. Edwards gave Respondent a list of 10 potential buyers, whom he contacted. Despite these efforts, no buyer could be found, and the bank scheduled a foreclosure sale. “In late 2004, Respondent learned of the existence of a substantial IRS lien against the premises. Around the same time, the Chapter 7 proceeding was dismissed.

In May 2005, the foreclosure sale occurred. Subsequent to the sale, Respondent identified a notice problem with respect to the IRS, but this became moot when the IRS waived that issue, and the sale was eventually ratified in August 2005. By then, Respondent was doing no work for Ms. Edwards of any kind. In April 2006, he returned $1,070 to her. “At no time during any of the foregoing events did Respondent ever advise Ms. Edwards that he had not converted the Chapter 7 to a Chapter 11.

Conclusions of Law “Petitioner alleges violations of Maryland Lawyers’ Rules of Professional Conduct 1.5(b), 1.15(a), 1.16(d), and 8.4(a), (c), and (d). Applying the standard of clear and convincing evidence, the Court finds that: “1. Respondent did not violate Rule 1.5(b). Although he was initially hired to convert a Chapter 7 to a Chapter 11 (something he never did), the focus of his efforts for Ms. Edwards never changed, viz., saving her property from her creditors.

Respondent did quote his client an hourly rate, and he did give her an estimate of her anticipated legal fees. Although he should have told Ms. Edwards that he was no longer pursuing the Chapter 11 option, the Court is not convinced that the scope of his representation ever changed. Moreover, the hourly rate was a reasonable one, and Respondent’s efforts were calculated to achieve the best result for his client under the circumstances. “2. Respondent did violate Rule 1.15(a) by not depositing the $3,630 into his escrow account. ⁴⁵⁸ “3.

Respondent did not violate 1.16(d) with respect to the $3,000, because Petitioner has failed to show by clear and convincing evidence that this fee was not earned by Respondent. At $200 an hour, this retainer represents 15 hours of work. Although he did not produce time sheets, his testimony regarding various efforts made to save the property went uncontradicted. Fifteen hours of work over a nine-month period of time does not appear to be excessive.

The Court does find, however, that Respondent did violate Rule 1.16(d) with respect to the $630 earmarked for converting the Chapter 7 to Chapter 11. Those monies were not earned as fees and should have been forthwith returned to the client when it became apparent that a Chapter 11 was not feasible. “4. Respondent did violate Rule 8.4(a), (c), and (d) for the reasons noted above, especially his failure to deposit the retainers into escrow and his failure to return the $630 promptly. Sheila Polk Findings of Fact “In March 2006, Sheila Polk retained Respondent to seek an emergency hearing for the custody of her grandson, who had been living with her for several years.

The natural mother wanted the child returned to her, but Ms. Polk believed it was not in his best interest. Ms. Polk paid Respondent a fee of $300 on or about 6 March 2006. The Respondent agreed to file for an emergency custody hearing on Ms. Polk’s behalf in the Circuit Court for Wicomico County, but failed to do so, although he had previously drafted a complaint for custody on her behalf. When Ms. Polk called Respondent to determine the status of the matter, he told her that he had filed for the emergency hearing.

At the hearing, Respondent testified that, while he knew he was not being truthful with Ms. Polk, he intended to file the complaint shortly after their conversation. He did not. Respondent advised Ms. Polk of his false ⁴⁵⁹ representation approximately a week later, when she asked him about the status of the matter. Respondent failed to return Ms. Polk’s fee until on or about 7 July 2006 after Ms. Polk filed a complaint 'with Petitioner.

Conclusions of Law “Petitioner alleges violation by Respondent of Rules 1.1, 1.3, 1.4, 1.16(d), and 8.4(a), (c), and (d). Petitioner has proven by clear and convincing evidence that he has violated all of them. “1. By failing to file a timely request for an emergency hearing, Respondent violated Rules 1.1 and 1.3. “2. By misrepresenting the situation to Ms. Polk, he violated Rule 1.4. “3.

By failing to return the unearned fee, he violated Rule 1.16(d). “4. By lying to his client and retaining an unearned fee, he violated Rule 8.4(d). (emphasis in original). STANDARD OF REVIEW In proceedings involving attorney discipline, this Court has original and complete jurisdiction and conducts an independent review of the record.

Attorney Grievance v. Nussbaum, 401 Md. 612 , -, 934 A.2d 1 , - (2007); Attorney Grievance v. Lawson, 401 Md. 536 , -, 933 A.2d 842 , - (2007); Attorney Grievance v. Mininsohn, 380 Md. 536, 564 , 846 A.2d 353, 369-70 (2004); Attorney Grievance v. Awuah, 374 Md. 505, 520 , 823 A.2d 651, 660 (2003). In our review of the record, the hearing judge’s findings of fact generally will be accepted unless they are clearly erroneous. Maryland Rule 16—759(b)(2); 10 Nussbaum , 401 Md. at -, 934 A.2d at ⁴⁶⁰ -; Lawson , 401 Md. at -, 933 A.2d at -; Attorney Grievance v. Goff, 399 Md. 1, 28 , 922 A.2d 554, 570 (2007); Attorney Grievance v. Gore, 380 Md. 455, 468 , 845 A.2d 1204, 1211 (2004); Attorney Grievance v. Potter, 380 Md. 128, 151 , 844 A.2d 367, 380-381 (2004). As to the hearing judge’s conclusions of law, such as whether provisions of the MRPC were violated, our consideration is essentially de novo.

Maryland Rule 16—759(b)(1); 11 Nussbaum , 401 Md. at -, 934 A.2d at -; Lawson , 401 Md. at -, 933 A.2d at -; Attorney Grievance v. Mba-Jonas, 397 Md. 690, 700 , 919 A.2d 669, 675 (2007); Attorney Grievance v. McLaughlin, 372 Md. 467, 493 , 813 A.2d 1145, 1160 (2002); Mininsohn, 380 Md. at 564 , 846 A.2d at 370 ; Awuah, 374 Md. at 520 , 823 A.2d at 660 . DISCUSSION Neither Petitioner nor Respondent took exception to the hearing judge’s findings of fact. Therefore, we accept the hearing court’s findings of fact, as established, for the purpose of determining the appropriate sanction. Maryland Rule 16-759(b)(2)(A); Attorney Grievance v. Floyd, 400 Md. 236, 250 , 929 A.2d 61, 69 (2007); Attorney Grievance v. Logan, 390 Md. 313, 319 , 888 A.2d 359, 363 (2005).

In the Edwards matter, Judge Jackson concluded that Respondent violated MRPC 1.15(a), 1.16(d) with respect to $630 that Respondent had received representing a conversion fee in a Chapter 11 bankruptcy proceeding, and 8.4(a), (c) and (d), and in the Polk matter, that Respondent violated MRPC 1.1, 1.3, 1.4, 1.16(d) and 8.4(d). He also, in the Edwards matter, concluded that ⁴⁶¹ Respondent did not violate MRPC 1.5(b), nor did he violate MRPC 1.16(d) with respect to a $3,000 retainer, and also concluded that the Respondent did not violate MRPC 8.4(a) and (c) in the Polk matter. Both Petitioner and Respondent took exceptions to various conclusions of law, each of which we shall address. A. Petitioner’s Exception to Conclusions of Law In the Edwards matter, Petitioner did not except to Judge Jackson’s conclusion that MRPC 1.5(b) was not violated, nor to Judge Jackson’s conclusion that MRPC 1.16(d) was not violated with respect to the retainer of $3,000.

With respect to the Polk matter, Petitioner excepts to Judge Jackson’s failure to determine that MRPC 8.4(c) was violated when Respondent lied to Ms. Polk when he told her that he had filed a motion for an emergency custody hearing, when he knew he had not, and failed to return the retainer. Petitioner argues that because Judge Jackson stated, “By lying to his client and retaining an unearned fee, he violated MRPC 8.4(d),” it is “virtually axiomatic that the conduct set forth in this recital demonstrates a violation of [MRPC 8.4(c) ]” as well. Respondent contends, conversely, that he did not violate MRPC 8.4(c) because his misrepresentation to Ms. Polk that he had filed the petition for the emergency hearing was a “little white lie” that did not rise to “fraudulent, deceitful, or misrepresentative behavior” proscribed by MRPC 8.4(c), and that he returned the $300 to Ms. Polk after she filed her complaint with Bar Counsel. MRPC 8.4(c) states that it is professional misconduct for an attorney to: (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation....

We have said that lying to a client about whether a pleading was filed can amount to a violation of MRPC 8.4(c). In Attorney Grievance v. Steinberg, 395 Md. 337 , 910 A.2d 429 (2006), Steinberg was retained to represent a client in her efforts to forestall the sale of her home in foreclosure by filing ⁴⁶² a Chapter 13 bankruptcy petition; the client paid Steinberg a $1,000 retainer. Steinberg did not file the petition, but he told the client that he had. The client subsequently received a letter notifying her of the date of the foreclosure sale, after which, Steinberg again assured her that he had filed the petition.

Steinberg did not make “timely good faith efforts to make restitution or rectify the damage caused by his misrepresentations,” id. at 376 , 910 A.2d at 452 , and we concluded that he violated MRPC 8.4(c) because he misrepresented that he had filed the Chapter 13 petition: Further, Respondent violated MRPC 8.4(c) when he misrepresented to Ms. Adeleye that he filed the Chapter 13 Petition. In Harrington, we held that it was a violation of MRPC 8.4(c) where an attorney lead his client to believe that he had filed a law suit on her behalf when he, in fact, had not. 367 Md. at 48, 785 A.2d at 1267. Steinberg, 395 Md. at 369-70 , 910 A.2d at 448 . See also Attorney Grievance v. Guberman, 392 Md. 131, 135-36 , 896 A.2d 337, 339-40 (2006) (attorney violated MRPC 8.4(c) when he falsely represented to the partners of his firm that he had filed an appeal on behalf of a client); Attorney Grievance v. Harrington, 367 Md. 36, 48 , 785 A.2d 1260, 1267 (2001) (attorney violated MRPC 8.4(c) when he led his client to believe that he had filed a legal malpractice law suit on her behalf when he had not).

Also, in Attorney Grievance v. McLaughlin, 372 Md. at 467 , 813 A.2d at 1145 , we concluded that McLaughlin violated MRPC 8.4(e) when he did not refund $72,000 in retainer fees provided by several clients. Specifically, we noted that because McLaughlin had not performed any work for the clients, his retention of the retainers was dishonest and deceitful, and remarked that the “retention of unearned fees paid by a client, alone, may constitute a violation of MRPC 8.4(c).” Id. at 502-03 , 813 A.2d at 1166 (citations omitted). See also Attorney Grievance Comm’n v. Milliken, 348 Md. 486, 510 , 704 A.2d 1225, 1236 (1998) (attorney violated MRPC 8.4(c) when he failed to refund a fee he had not earned). We, therefore, sustain Bar Counsel’s exception and determine that Respon ⁴⁶³ dent acted dishonestly and deceitfully in violation of MRPC 8.4(c) when he lied to his client about his failure to file the petition and did not promptly return her fee.

B. Respondent’s Exceptions to Conclusions of Law 1. The Edwards Matter Judge Jackson concluded that Respondent violated MRPC 1.15(a) by not depositing Ms. Edwards’ $3,000 retainer into his escrow account. He also determined that Respondent violated MRPC 1.15(a) by not depositing into his escrow account an additional $630 check from Ms. Edwards which was identified as payment of the filing fees for converting a Chapter 7 to a Chapter 11 bankruptcy, and MRPC 1.16(d) by not promptly returning to Ms. Edwards the $630. The hearing judge also concluded that Respondent violated MRPC 8.4(a), (c) and (d) based upon his previous conclusions of law and especially because Respondent did not deposit Ms. Edwards’ $3,000 retainer and $630 check into his escrow account and failed to promptly return the $630.

Respondent excepts to Judge Jackson’s conclusion that he violated MRPC 1.15(a), arguing that his conduct constituted a technical violation, but not a substantive violation because Ms. Edwards, allegedly, was not harmed as a result. Bar Counsel, conversely, argues that Respondent violated MRPC 1.15(a) because he deposited the $3,000 retainer and the $630 check into his general operating account. MRPC 1.15(a) states in part: 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. With respect to the $3,000 retainer, we recently stated in Attorney Grievance v. Guida, 391 Md. 33 , 891 A.2d 1085 (2006): Funds given in anticipation of future legal services qualify as trust money and, accordingly, are to be deposited in trust accounts separate from the attorney’s property, to be re ⁴⁶⁴ moved promptly by the attorney as earned.

To deposit such trust money into the attorney’s personal or operating accounts before the fees are earned constitutes a violation of MRPC 1.15(a). Id. at 53 , 891 A.2d at 1097 (emphasis added) (citations omitted). See also Attorney Grievance v. Culver, 381 Md. 241, 279 , 849 A.2d 423, 446 (2004) (attorney violated MRPC 1.15(a) when he deposited retainer in operating account); Attorney Grievance v. Blum, 373 Md. 275, 298-99 , 818 A.2d 219, 233 (2003) (attorney who deposited funds for the purpose of retaining his future services into his personal and operating accounts violated MRPC 1.15(a)); McLaughlin, 372 Md. at 504 , 813 A.2d at 1167 (attorney violated MRPC 1.15(a) when he deposited retainer fees into his operating account). Clearly, Respondent’s failure to deposit the $3,000 retainer into his escrow account was a violation of MRPC 1.15(a) and we overrule Respondent’s exception.

With respect to Respondent’s failure to deposit the filing fee of $630 into his escrow account, money linked to a specific purpose qualifies as trust money as well and must be deposited in an escrow account. In Attorney Grievance v. Rose, 391 Md. 101, 111 , 892 A.2d 469, 475 (2006), we concluded that Rose violated MRPC 1.15(a) when he failed to deposit $100 from a client for the filing fee in a divorce action into his escrow account. In Attorney Grievance v. Calhoun, 391 Md. 532, 567 , 894 A.2d 518, 538-39 (2006), moreover, we determined that Calhoun violated MRPC 1.15(a) by failing to deposit $5,000 received from a client to pay for prospective deposition costs into his escrow account. Clearly, Respondent’s failure to deposit the $630 payment for converting the Chapter 7 to a Chapter 11 bankruptcy petition into his escrow account was a violation of MRPC 1.15(a) and we overrule Respondent’s exception.

Respondent also excepts to Judge Jackson’s conclusion that he violated MRPC 1.16(d) regarding the $630, arguing that his conduct constituted a technical violation of that rule, but not a substantive violation because Ms. Edwards, alleged-. ⁴⁶⁵ ly, was not harmed as a result. Bar Counsel argues, conversely, that Respondent violated MRPC 1.16(d) because he failed to promptly return the $680. MRPC 1.16(d) provides in part: Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client’s interests, such as ... refunding any advance payment of fee or expense that has not been earned or incurred. In Attorney Grievance v. Tinsky, 377 Md. 646, 652-53 , 835 A.2d 542, 545-46 (2003), this Court determined that Tinsky violated MRPC 1.16(d) when he failed to return $925 provided by a client for “his fees and expenses” in connection with a Chapter 7 bankruptcy petition when the client terminated his representation.

See also Attorney Grievance v. Duvall, 384 Md. 234, 240 , 863 A.2d 291, 294 (2004) (attorney violated MRPC 1.16(d) when she failed to return advance payment of fee and expenses when her client terminated the representation). Respondent did not return the $630 when he determined that a Chapter 11 conversion was not feasible, and thereby violated MRPC 1.16(d); we overrule Respondent’s exception. Respondent also excepts to Judge Jackson’s conclusion that he violated MRPC 8.4(a), (c) and (d), arguing that he “did not act with any wrongful or dishonest intent; did not attempt to violate any rule of professional conduct; did not engage in conduct involving dishonesty, fraud, deceit or misrepresentation; and did not engage in conduct prejudicial to the administration of justice.” Respondent contends that he did not violate MRPC 8.4(a), (c) and (d) because his intention was not to cheat Ms. Edwards, nor to enrich himself. Bar Counsel argues in opposition that Respondent violated MRPC 8.4(a), (c) and (d) by intentionally misappropriating Ms. Edwards’ funds.

Sections (a), (c) and (d) of MRPC 8.4 state in pertinent part: It is professional misconduct for a lawyer to: ⁴⁶⁶ (a) violate or attempt to violate the Maryland Lawyers’ Rules of Professional Conduct ...; (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation; (d) engage in conduct that is prejudicial to the administration of justice____ With respect to the $3,000 retainer, we have consistently noted that the failure to deposit client funds into escrow accounts amounts to a violation of MRPC 8.4(c) and (d). In Attorney Grievance v. James, 385 Md. 637 , 870 A.2d 229 (2005), James was given a $500 retainer, which he immediately deposited into his operating account. We noted that the “gravamen of the issue surrounding the money is that none of Ms. Kazim’s retainer ever was placed in a trust account ...,” id. at 661 , 870 A.2d at 243 , and that this failure constituted misappropriation of client funds in violation of MRPC 8.4(c) and (d): James’s failure to deposit Mr. Kazim’s retainer and $500 in funds to be paid to an investigator also violated MRPC ... 8.4(d).... The hearing judge determined that James acted in violation of MRPC 8.4(c) when he dishonestly took trust monies from Mr. Kazim by failing to deposit the $500 retainer and investigative money in the trust account.

We have previously held that “[ijntentional misappropriation is also a violation of MRPC Rule ... 8.4(c).” Id. at 663-64 , 870 A.2d at 244-45 (citations omitted). See also