The Colorado Lawyer
Vol. 30, No. 8 [Page 137]
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From the Courts
Colorado Disciplinary Cases
Colorado Supreme Court
Presiding Disciplinary Judge
The Colorado Supreme Court has adopted a series of changes to the attorney regulation system, including the establishment of the Office of the Presiding Disciplinary Judge, pursuant to C.R.C.P. 251.16, and a new intermediate appellate entity known as the Appellate Discipline Commission, pursuant to C.R.C.P. 251.24. The Court also made extensive revisions to the rules governing the disciplinary process, repealing C.R.C.P. 241 et seq., and replacing those rules with C.R.C.P. 251 et seq. The Presiding Disciplinary Judge presides over attorney regulation proceedings and issues orders together with a two-member hearing board at trials and hearings. The Rules of Civil Procedure and the Rules of Evidence apply to all attorney regulation proceedings before the Presiding Disciplinary Judge. SeeC.R.C.P. 251.18(d).
Beginning with the September 1999 issue, The Colorado Lawyer will publish the summaries and full-text opinions of the Presiding Disciplinary Judge, Roger L. Keithley, and a two-member hearing board, whose members are drawn from a pool appointed by the Supreme Court, and the opinions of the Appellate Discipline Commission.
These Opinions may be appealed in accordance with C.R.C.P. 251.26 and C.R.C.P. 251.27.
The full-text opinions, along with their summaries, are available on the CBA homepage at http://www.cobar.org/tcl/index.htm. See page 112 for details. They are also available on Lexis-Nexis under www.lexis.com/research. The summaries and opinions may then be located by clicking on States Legal U.S./Colorado/Cases and Court Rules/By Court/Colorado Supreme Court Disciplinary Opinions.
Case Number: 01PDJ032
BRUCE JAMES DONADIO
THE PEOPLE OF THE STATE OF COLORADO
ORIGINAL PROCEEDING IN DISCIPLINE BEFORE
THE OFFICE OF THE PRESIDING DISCIPLINARY JUDGE
June 8, 2001
ORDER RE: REINSTATEMENT PURSUANT TO C.R.C.P. 251.29(j)
This matter is set for a Reinstatement Hearing on today’s date, June 8, 2001. Teresa M. Garcia appeared on behalf of the People of the State of Colorado ("respondent"). Jeffrey S. Pagliuca appeared on behalf of the Petitioner, Bruce James Donadio ("Donadio"). The parties have submitted a Stipulation and Agreement Concerning Petitioner’s Verified Petition for Reinstatement filed May 24, 2001 in which the parties stipulate that Donadio has established, by clear and convincing evidence, that he has complied with all applicable orders and rules relating to attorney discipline, that he has rehabilitated himself, and is fit to practice law. The parties do not believe that a formal hearing in this matter is necessary. The parties request that the Presiding Disciplinary Judge enter an Order reinstating Donadio as an attorney licensed to practice law in the State of Colorado, subject to the conditions set forth below.
On June 8, 2001, Bruce James Donadio appeared before the Presiding Disciplinary Judge, attested to the representations set forth in the Stipulation and Agreement Concerning Petitioner’s Verified Petition For Reinstatement and provided testimony. The PDJ, pursuant to C.R.C.P. 251.29(j) finds that the Petition for Reinstatement was filed within ninety days prior to the expiration of the eighteen month period of suspension and the Office of Regulation Counsel has had ample opportunity to conduct any investigation it deems necessary and has in fact conducted such an investigation. Accordingly, the PDJ approves the Stipulation and Agreement Concerning Petitioner’s Verified Petition For Reinstatement and herein Orders:
BRUCE JAMES DONADIO, attorney registration number 24539 is reinstated to the practice of law effective June 8, 2001, subject to the following conditions; such conditions shall apply for a period of eighteen months:
(a) Donadio shall provide all releases deemed necessary by Attorney Regulation Counsel to monitor Donadio’s counseling and/or mental health treatment. This includes releases for any and all records of Donadio’s counseling and/or treatment, and permission for Attorney Regulation Counsel to discuss Donadio’s condition with his treating mental health professionals and/or sponsors;
(b) Donadio shall continue the following: psychotherapy by Dr. Randy Cale or other qualified psychiatrist or psychologist trained in or specializing in substance abuse issues for as long as that therapist believes such therapy is required; "aftercare" or other appropriate treatment and counseling for substance abuse in accordance with the recommendation of his rehabilitation mental health providers. The frequency of any counseling shall be determined by Dr. Cale or any subsequent qualified mental health provider. All mental health providers utilized by Donadio must be approved by Attorney Regulation Counsel. Donadio must promptly inform Attorney Regulation Counsel of any intended changes in providers and provide Attorney Regulation Counsel with the appropriate releases to interview these providers about Donadio. Dr. Cale or any other qualified mental health professional shall report monthly to Attorney Regulation Counsel.
(c) Donadio shall submit to random drug and alcohol tests for one year after he is reinstated to the practice of law in Colorado. Reports of test results will be made to Attorney Regulation Counsel. All random drug and alcohol tests requested of Donadio shall be completed within 24 hours of the request, absent good cause.
(d) Donadio shall attend Alcoholic Anonymous or Narcotics Anonymous at least two times weekly.
(e) Practice monitoring shall be required for a period of one year if Donadio returns to private practice in Colorado or elsewhere in accordance with the following terms:
(1) An attorney approved by Attorney Regulation Counsel shall monitor Donadio’s law practice for one year in accordance with these conditions. Donadio shall identify the proposed monitor to the Attorney Regulation Counsel at least 30 days prior to returning to private law practice.
(2) As Donadio acquires clients, he shall notify the monitor and provide an initial summary of the client’s matter and any action he intends to take. Donadio shall prepare and provide to the monitor a timeline for each open case showing deadlines for various actions. On subsequent lists, Donadio shall note whether the deadlines have been met and shall identify any additional action that has been taken;
(3) The monitor shall review Donadio’s tickler and calendar system initially and then at least twice more, at approximately months six and twelve after the monitor’s monitoring period begins;
(4) Donadio shall brief the monitor on his method of accounting for fees (including trust funds). Initially, and at six-month intervals, Donadio shall provide proof to the monitor of the existence of a trust account for any client retainers, advance fees or other funds held for clients or third parties arising from his law practice. The monitor need not audit Donadio’s accounts or finances, but should determine whether Donadio has a ledger or other system which reasonably appears to accomplish Donadio’s safeguarding and accounting obligations under Colo. R.P.C. 1.15 or similar rules in other jurisdictions. If the monitor has any unresolved concerns about Donadio’s financial accounting, the monitor should notify the Attorney Regulation Counsel, which may investigate further or suggest resolution of the concerns. Donadio is responsible for providing complete and accurate information to the monitor, understanding that the effectiveness of the monitor’s oversight depends on the information provided by Donadio;
(5) The monitoring shall be for a period of one year following Donadio’s return to private practice. The one year period of monitoring applies regardless of the date Donadio returns to private practice;
(6) The monitor shall notify the Attorney Regulation Counsel of any concerns requiring more extensive monitoring. Donadio shall comply with any increased monitoring requirements directed by the monitor or the Attorney Regulation Counsel;
(7) The monitor will notify the Attorney Regulation Counsel of any serious deficiencies in Donadio’s capability to handle the current or an increased caseload, or capability to handle a particular case. The monitor need not investigate the deficiencies fully, but may request further investigation by the Attorney Regulation Counsel;
(8) The monitoring shall be at Donadio’s own expense;
(9) The monitor will take into account Donadio’s geographical location in setting the schedule and conditions for review and deciding upon a telephonic or an in-person conference;
(10) The monitor shall send the Attorney Regulation Counsel a letter report monthly to summarize the monitor’s actions to meet the responsibility under the monitoring agreement. The monitor should note Donadio’s compliance with the calendaring, tickling, accounting and other requirements set forth under this monitoring plan. Any issues or concerns that were addressed by the monitor and Donadio, and the resolution of those issues (or the lack of resolution) should be included in the report. The Attorney Regulation Counsel reserves the right to require a more detailed written or oral report from the monitor, or to conduct an investigation of Donadio’s compliance with the conditions;
(11) The monitor is not expected to provide substantive legal advice to Donadio about any of his cases or any legal issues pertaining to his cases. Donadio understands that he must make his own decisions about each case, and may need to associate with a more experienced attorney in a particular area. The monitor cannot serve as a consultant on the handling of cases;
(12) Donadio shall ensure that appropriate releases are obtained to allow the monitor to review any of Donadio’s files that the monitor believes may be necessary in carrying out the monitoring functions, although it is not anticipated that the monitor will be required to do this if Donadio provides accurate timelines and summaries. If the monitor believes that it is necessary to discuss information with Donadio that otherwise may be subject to the attorney-client privilege between Donadio and his client(s) then Donadio shall ensure that appropriate client releases are sought promptly and shall confer with the monitor in advance on the language of the releases;
(13) Donadio shall hold the monitor harmless from any claims of malpractice by his clients. As noted above, Donadio is solely responsible for providing appropriate legal services for each client, and Donadio specifically agrees to this.
(14) If the approved monitor is no longer willing or able to serve as a monitor, the monitor should notify Donadio and Attorney Regulation Counsel promptly and in writing. Donadio is responsible for providing an alternate candidate for consideration by Attorney Regulation Counsel within ten (10) days of receipt of the monitor’s written notice.
Case Number: 00PDJ040
THE PEOPLE OF THE STATE OF COLORADO
MARCI S. GRAY
ORIGINAL PROCEEDING IN DISCIPLINE BEFORE
THE OFFICE OF THE PRESIDING DISCIPLINARY JUDGE
June 6, 2001
OPINION AND ORDER IMPOSING SANCTIONS
Opinion issued by Presiding Disciplinary Judge Roger L. Keithley and Hearing Board members Mary Weiss and Mark D. Sullivan, both members of the bar.
SANCTION IMPOSED: PUBLIC CENSURE
This consolidated matter was heard on September 27, 2000, before the Presiding Disciplinary Judge ("PDJ") and two hearing board members, Mary Weiss and Mark D. Sullivan, both members of the Bar. James E. Coyle, Assistant Regulation Counsel, represented the People of the State of Colorado (the "People"). Carl F. Manthei represented the respondent, Marci S. Gray("Gray"), who was also present. The People’s exhibits 1 through 28 and 30 were admitted into evidence, and Gray’s exhibits 1through 4 were also admitted into evidence. The PDJ and Hearing Board heard testimony from the People’s witness Judith LaSpada, Mark Field and Marci S. Gray, and from Gray’s witness Mark Field. The PDJ and Hearing Board considered argument of counsel, the exhibits admitted, assessed the credibility of the witnesses, and made the following findings of fact which were established by clear and convincing evidence.
I. FINDINGS OF FACT
Marci S. Gray has taken and subscribed the oath of admission, was admitted to the bar of this court on October 21, 1996 and is registered upon the official records of the Supreme Court, registration number 27307. Gray is subject to the jurisdiction of this court in these disciplinary proceedings.
Gray was employed by Mark Field ("Field") prior to September 15, 1997. On that date the Colorado Supreme Court issued an opinion suspending Field from the practice of law for six months effective October 15, 1997. See People v. Field, 944 P.2d 1252 (Colo. 1997). During the one month period before the effective date of his suspension, Field and Gray discussed the ramifications of his suspension on their law practice. Prior to the issuance of the opinion, although Gray was licensed to practice law, she was employed and worked as a secretary for Field. Field obtained a written legal opinion from another Colorado attorney setting forth the limitations imposed upon him as a result of the suspension order. Field was informed that he could not appear in court, meet with clients, counsel clients, advise other attorneys, or sign legal documents. He was informed that he could remain with the law office, however, so long as his duties were limited to acting as a secretary, bookkeeping or acting as a paralegal.
Field asked Gray and Gray agreed to take over the practice of law aspects of the law practice during the period of Field’s suspension in order to continue to serve his three clients. It was intended by Field and Gray that Field would continue to work on cases as a paralegal under Gray’s supervision and that his paralegal time would be billed at $100 per hour. The clients were duly notified of the change in responsibility and agreed to continue with Gray as their attorney. Gray realized that under this reorganization that she was the attorney responsible for handling client matters and for supervising Field. Gray reviewed the opinion suspending Field, the Colorado Rules of Professional Conduct ("Colo. RPC") and the opinion of a Colorado attorney regarding the limitations on Field’s activities. Gray understood the new arrangement between herself and Field placed full responsibility for all legal issues upon her but that she would defer to Field on business related matters. As part of the change in responsibility arising out of the suspension order, Gray and Field began using letterhead identifying themselves as "Field & Associates, Attorneys at Law."1
Prior to his suspension, Field engaged primarily in a collection practice doing a substantial amount of work for American Banco, a debt collection agency. On September 30, 1997, after the Field disciplinary opinion was issued but before the suspension became effective, the assets and good will of American Banco were sold to Judy LaSpada ("LaSpada") and continued to operate under the name First Revenue Assurance, LLC d/b/a American Banco. LaSpada was aware of Field’s suspension and Gray’s intention to begin handling all legal aspects of the collection files and agreed to continue as a client under that arrangement. However, LaSpada immediately informed Field that she wanted to renegotiate the legal fees charged on the collection cases. Both before and after his suspension became effective, Field negotiated with LaSpada in an attempt to retain the client. LaSpada sought a substantial reduction in the per case fees charged on each matter and Field was resistant. The negotiations included the transmittal of several letters by Field on "Field & Associates" letterhead signed by Field.
On October 6, 1997, Field sent a legal fee statement to LaSpada detailing services performed before the effective date of Field’s suspension. Field’s time was billed at $200 per hour. On November 18, 1997, Field met with LaSpada in her office to discuss certain entries contained upon the legal fee statement she had received during the month of October. LaSpada objected to the $200 per hour rate for Field, paralegal time billed to train one of her employees and lack of documentation for other entries. LaSpada refused to pay the statement until certain modifications were made. By letter dated January 13, 1998, LaSpada memorialized her recollection of the conversation between herself and Field at the November 18 meeting, specifically mentioning that Field had agreed to reduce his $200 per hour rate and eliminate the fees for training. The letter referenced LaSpada’s earlier request, "I also requested a detailed account of the hourly charges for validation and account documentation." The letter demanded, in specific detail, information regarding billed telephone calls. By the time LaSpada sent the January 13 letter, negotiations were at an impasse, LaSpada had received both the October and November statements from Field and she was generally disputing numerous entries on those statements. LaSpada closed her letter to Field "I am enclosing a check in the amount of $1,000.00 dollars to demonstrate good faith and our intention to pay you for valid services rendered. Any services that can not be supported with the proper documentation will not be paid. Please provide the revised invoice as quickly as possible."
Field responded on January 26, 1998, using "Field & Associates" letterhead, attempted to explain the entries in a general fashion, made some modifications to the amount outstanding, requested full payment and informed LaSpada that the December statement added $2,338.50 to the amount owed.2 On February 9, 1998, LaSpada sent a letter to Field and Gray terminating their relationship and demanding that any garnishment checks be promptly forwarded to her office. LaSpada premised the termination upon her repeated unsuccessful efforts to substantiate the billing. On February 11, 1998, in a letter on "Field & Associates" letterhead, signed by both Field and Gray, LaSpada was informed that "I cannot continue to represent your company." The letter advised LaSpada that motions to withdraw were being prepared and filed, demanded payment of outstanding statements and threatened action to collect. LaSpada responded the following day, confirmed the termination of the attorney/client relationship and stated "I am willing to pay for services performed provided that you can provide documentation supporting your charges. I have asked for this twice verbally and now three times in writing. Once the documentation is provided and validated, you will be paid for services actually performed."
Historically, the collection cases handled by Field and Gray resulted in payments from debtors of American Banco pursuant to garnishments. Either the garnished funds or garnishment checks were promptly tendered to American Banco after receipt. Recognizing that the billing dispute with American Banco would not be timely resolved, Gray instructed Field to open a bank account and escrow all funds received under American Banco garnishments. On February 5, 1998, Field opened a bank account entitled "Field & Associates Escrow for American Banco." The account was not interest bearing. Moreover, Field designated only himself and his wife as authorized signatories on the account. Gray did not become a signatory on the account until March 1998, a month after the account was opened and after several transactions occurred in the account.
Between February 5, 1998 and February 25, 1998, $9,987.19 was deposited into the escrow account. All of the funds deposited were American Banco funds arising from garnishments on cases handled by Field or Gray. On February 9 and again on February 17, 1998, with Gray’s knowledge, Field withdrew a total of $5,807 from the escrow account for law office expenses. LaSpada neither authorized nor was aware of these withdrawals at the time they occurred. On February 20, 1998, Gray sent a letter to LaSpada which stated, "This letter is your notification that due to unpaid fees owed me by your company, I have asserted an attorney’s lien pursuant to C.R.S. § 12-9-119 on property of First Revenue Assurance, LLC in my possession." The same day, Field, with Gray’s knowledge, wrote another check on the escrow account for an additional $2,000.00 payable to Field & Associates. Prior to providing any notice to LaSpada of the $9,612.05 in disputed funds placed in the escrow account between February 5 and February 20, 1998, Gray had authorized the withdrawal of $7,807.00 of those funds for law office related expenses. On February 25, 1998, Field, again with Gray’s knowledge, wrote a fourth check on the escrow account for $1,700.00. The proceeds of that check, as with the earlier withdrawals, were deposited into the business account of Field & Associates.
On February 27, 1998, another statement was forwarded to LaSpada reflecting an overdue balance of $10,026.50, additional fees of $4,068.14 and a credit as of February 20, 1998 of $7,409.57 for "payment through attorney’s lien on garnishments." In March 1998, Gray became the sole signatory on the escrow account and on March 20 issued a check to Field & Associates for $1,500.00, which was deposited into the Field & Associates business account. Two additional statements were sent to LaSpada by Field & Associates in the following months. They reflected additional fees of $1,473.15 and payments by way of attorney’s lien on garnishments of an additional $3,712.54.
Between February 5, 1998 and the end of May 1998, Gray and Field claimed to be owed $11,499.65 by American Banco, deposited $12,530.72 of American Banco funds into the escrow account and withdrew $9,507.00 of those funds for payment of outstanding statements. During that entire period of time, LaSpada disputed the amount owed to Field and Gray for legal services on behalf of American Banco.3 Prior to proceeding on their course of action to expend portions of American Banco garnishment funds, both Field and Gray researched the Colorado attorney’s lien statute, § 12-5-119, 4 C.R.S. (2000), and became convinced they could take possession of funds generated from judgments they obtained on behalf of American Banco and use those funds to pay their outstanding legal fee statements.
First Revenue Assurance, LLC d/b/a American Banco eventually brought suit against Field and Gray in Denver County Court seeking to recover the garnished funds used by Field and Gray to pay the outstanding fee statements and to determine the amount of money, if any, American Banco owed Field and Gray. On January 6, 1999, a county court judge ruled that although Field and Gray had not strictly complied with the requirements of the attorney’s charging lien statute, they were entitled to a sum of money exceeding the amount they withdrew from the escrow account. In reaching his decision, the county court judge concluded that the time billed by Field as paralegal time at $100.00 per hour was against public policy and deducted that amount from the amount claimed by Field against American Banco. 4
II. CONCLUSIONS OF LAW
The Complaint in this disciplinary case consists of four separate claims charging Gray with several violations of The Colorado Rules of Professional Conduct ("Colo. RPC") for which discipline may be imposed under C.R.C.P. 251.5. Claim 1 alleges that Gray violated Colo. RPC 7.5(a)(a lawyer shall not use or participate in the use of a firm name, letterhead, professional card, office sign, telephone directory listing, law list, legal directory listing, or other professional designation that violates Rule 7.1(making a false or misleading communication about the lawyer or the lawyer services). This claim is based upon the use of "Field & Associates, Attorneys at Law" letterhead transmitted to American Banco and the practice of law under the firm name of "Field & Associates" following Field’s suspension from the practice of law.
The letters forwarded to American Banco on the "Field & Associates" letterhead, with the exception of one, were signed by Field. There is no indication in the letters that Field was suspended from the practice of law. The final letter was signed both by Field and Gray and, as with the earlier letters, makes no mention of the status of Field’s license to practice law. Utilization of the letterhead of an attorney or association of attorneys, when signed, absent appropriate qualification, conveys the message that the person signing the letterhead is an attorney duly licensed and authorized to practice law. Whether the person signing the letterhead is, in fact, an attorney authorized to practice law is a material fact. Colo. RPC 7.5(a) does not require proof of an intent to mislead or reliance as an element of its violation. The rule is designed to place the burden upon the attorney to insure that the representation of authority to practice law is truthful and complete. Whether the recipient or another is actually misled by the use of the letterhead is not relevant to determining a violation of the rule. See Colo. RPC 7.1,5 which, on its face, does not require reliance;6 People v. Smith, 830 P.2d 1003, 1006 (Colo. 1992) (prohibiting use or participation in the use of a letterhead if it includes a statement or claim that is false, fraudulent, misleading or deceptive).
Gray’s participation in the practice of law under the name "Field & Associates," knowing that Field was suspended, utilizing letterhead under that name and allowing Field to sign correspondence on that letterhead without an appropriate designation of Field’s suspension from the practice of law constitutes a violation of Colo. RPC 7.5(a).
Claim 2 of the Complaint charges Gray with a violation of Colo. RPC 1.5(a)(charging an unreasonable fee) as a result of the $100 per hour charge for Field’s services as a paralegal. Colo. RPC 1.5(a) states:
(a) A lawyer’s fee shall be reasonable. The factors to be considered in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
Gray argues that Colo. RPC 1.5(a) is strictly limited to the fee charged for the lawyer and does not encompass legal fees arising from other legal services provided by the lawyer’s staff. Colo. RPC 1.5(a) is not so limited. Individually or in an association with other lawyers, it is the lawyer who is responsible for the creation of the lawyer/client relationship and the explanation of fees and charges that relationship may generate. See Colo. RPC 1.2, Colo. RPC 1.5 and Colo. RPC 5.3. That responsibility is placed upon the lawyer to minimize potential misunderstandings between lawyer and client over the relationship and its prospective cost to the client. Of necessity, the required explanation of services and costs must include charges related to the tasks to be performed which are not directly related to the lawyer’s personal devotion of time to the client’s needs. The requirement that a "lawyer’s fee" be reasonable as set forth in Colo. RPC 1.5(a) includes all charges included within the lawyer’s statement to the client for services rendered to the client by the lawyer or members of his/her support staff. See Geoffrey C. Hazard, Jr., The Law of Lawyering, § 8.8 n.1 (Aspen Law & Business 2001) (stating that Rule 1.4 requires a lawyer to explain a matter in sufficient detail to enable the client "to make informed decisions regarding the representation." The total amount that the representation will cost the client is obviously a salient fact "regarding the representation" (emphasis in original)); ABA Comm. on Professional Ethics and Grievances, Formal Op. 93-379 (1993)(discussing billing for professional fees, disbursements and other expenses and providing that a lawyer must disclose to a client the basis on which the client is to be billed for both professional time and any other charges).
To determine whether the charges set forth on a lawyer’s statement to the client is reasonable or unreasonable, Colo. RPC 1.5 sets forth eight separate factors which may be considered. Analysis of seven of the factors depends upon the unique facts of the particular situation. The remaining factor is based upon the fee customarily charged for similar legal services in the locality. Each factor, however, may only be determined from evidence presented in any given case. In this disciplinary case, the only evidence bearing upon any of the eight factors was the admission into evidence of the statements submitted to American Banco for the services provided, the fact that Gray and Field performed legal services primarily for three clients and that Field was a suspended lawyer. No evidence was offered relating to the novelty and difficulty of the task presented, the relative skill necessary for the legal services, the fee customarily charged for paralegal services, the results obtained, or the time constraints, if any, imposed by the client. The statements submitted to American Banco do not correlate to the services provided to a particular case, disclose the relative complexity of issues presented nor, on their face, identify paralegal time versus lawyer time. Absent additional evidence, in particular evidence bearing upon the customary fee for similar paralegal services, the PDJ and Hearing Board cannot conclude by clear and convincing evidence that charging paralegal time at the rate of $100.00 per hour in collection cases would constitute an unreasonable fee. Consequently, the charge in claim 2 of Colo. RPC 1.5(a) is dismissed.
Claim 3 of the Complaint charged Gray with a violation of Colo. RPC 1.15(d)(failing to deposit client funds in an interest bearing account), Colo. RPC 5.3(b)(failing to supervise a non-lawyer) and, alternatively, Colo. RPC 8.4(h)(other conduct adversely reflecting on a lawyer’s fitness to practice law).
The evidence was undisputed that Gray, as the responsible attorney, was involved in the decision to deposit the garnishment checks into a non-interest bearing escrow account.
The garnishment checks were generated from judgments secured by Field and Gray on behalf of American Banco from debtors of American Banco. The funds underlying the checks represented amounts owed to American Banco. Once the checks were presented for collection, in due course, the funds were deposited into the escrow account. When so deposited, those funds belonged to American Banco, the client. Although Field and/or Gray may have claimed a lien against the funds, the funds remained the property of American Banco.
In Colorado, there is no common law right to an attorney’s lien. People v. Brown, 840 P.2d 1085, 1087 (Colo. 1992). The right to a retaining or charging lien arises by statute. See § 12-5-119, 4 C.R.S. (2000) and § 12-5-120, 4 C.R.S. (2000) respectively. Therefore, strict compliance with the statute is required. Telluride Real Estate Co. v. Penthouse Affiliates, LLC, 996 P.2d 151, 154 (Colo. App. 1999)(stating that statutes in derogation of the common law must be strictly construed). The burden of proof is upon the attorney who claims a lien for services to show that he comes within the statute. See Gooding v. Lyon, 166 P. 564, 565 (Colo. 1917). The language of §12-5-119 implies that there is an agreement of compensation between the attorney and client. See §12-5-119, (providing that in the case of demands in suit and in the case of judgments obtained in whole or in part by any attorney, such attorney may file, with the clerk of the court wherein such cause is pending, notice of his claim as lienor, setting forth specifically the agreement of compensation between such attorney and his client)(emphasis added). In the present case, the amount of attorneys’ fees due from the client was disputed. See Florida Bar v. Bratton, 413 So. 2d 754 (Fla. 1982)(holding that an attorney cannot impose a valid lien on client’s funds entrusted to the attorney for a specific purpose where the parties have not agreed that fees should be paid out of the entrusted funds). If the attorney retains funds in excess of what he is subsequently determined to be entitled to, he may be liable for a wrongful conversion. See Adams, George, Lee, Schulte & Wards, P.S. v. Westinghouse Electric Corp., 597 F. 2d 570 (5th Cir 1979). "A lawyer having control over a trust account has no more right to make a unilateral disbursal of it to himself than he would to a stranger." In the Matter of Kunin, 313 S.E. 2d 697, 699 (Ga. 1984). "[The statute authorizing attorneys’ liens] must be understood to authorize the application of client funds held by an attorney to the satisfaction of liquidated sums owing to the attorney." Id. The disciplinary rules do not permit an attorney to enforce an attorney’s lien by helping himself to the client’s funds. State Bar Grievance Administrator v. Geralds, 263 N.W. 2d 241, 243 (Mich. 1978). The "right to retain" funds in escrow until the dispute is resolved under a retaining lien in no way translates into a right unilaterally to remove the funds for professional or personal use without independent or stipulated resolution to the conflict over fees. Attorney Grievance Commission of Maryland v. Sheridan, 741 A.2d 1143, 1161 (Md. 1999). To do so would directly conflict with the requirements of Colo. RPC 1.15. "[Rule 1.15 requires] that the funds in dispute be deposited in a proper escrow account, and not, as here, appropriated to the lawyer’s own use without independent resolution of the underlying fee controversy." Attorney Griev. Comm’n v. McIntire, 405 A.2d 273, 278 (Md. 1979); accord McGrath v. State Bar of California, 135 P.2d 1, 3 (Cal. 1943)(attorney found to have engaged in unethical conduct where he asserted a retaining lien in the proceeds of a judgment which he had collected for his client where the attorney had no agreement with his client for compensation for his services); See In Re Hays, 118 P.2d 265 (Okla. 1941)(holding that in the absence of an agreement for an additional fee, an attorney has no legal right to withhold any of the funds of the client even though such attorney might be entitled to an additional fee for the services rendered; an attorney has a general possessory interest or retaining lien on the client’s money for services or for a general balance due from his client but may not withhold it absent an agreement).
Colo. RPC 1.15 provides, in part:
(a) In connection with a representation, an attorney shall hold property of clients or third persons that is in an attorney’s possession separate from the attorney’s own property. Funds shall be kept in a separate account maintained in the state where the attorney’s office is situated, or elsewhere with the consent of the client or third person. Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and other property shall be kept by the attorney and shall be preserved for a period of seven years after termination of the representation.
(c) When in the course of representation a lawyer is in possession of property in which both the lawyer and another person claim interests, the property shall be kept separate by the lawyer until there is an accounting and severance of their interests. If a dispute arises concerning their respective interests, the portion in dispute shall be kept separate by the lawyer until the dispute is resolved.
(d) "Accounts" as used in paragraph (a) above shall mean one or more identifiable interest-bearing, insured depository accounts; provided, that with the consent of the client or third person whose funds are in the account, an account maintained under subparagraph (e)(1) below (interest is paid to the client or third person) need not be an insured depository account, but all accounts maintained under subparagraph (e)(2) below (interest is paid to the Colorado Lawyer Trust Account Foundation) shall be insured depository accounts. For the purpose of this rule, "insured depository accounts" shall mean government insured accounts at a regulated financial institution, on which withdrawals or transfers can be made on demand, subject only to any notice period which the institution is required to reserve by law or regulation.
Colo. RPC 1.15(c) must be considered in conjunction with Colo. RPC 1.15(a) and (d). Colo. RPC 1.15(a) in combination with Colo. RPC 1.15(d) require an attorney who holds funds of a client to place those funds in a separate interest bearing account. Colo. RPC 1.15(c) requires an attorney who holds possession of property, including funds, which is claimed by the client and a third person, to be kept separate until there has been an accounting and severance of interests. There is nothing within the language of Colo. RPC 1.15(c) or its commentary which suggests that Colo. RPC 1.15(c) displaces the mandate of Colo. 1.15(a) and (d):
The proper procedure for asserting and resolving a charging lien is spelled out in Model Rule 1.15(c). When a lawyer comes into possession of funds to which both she and a client assert an interest, she must promptly disburse any undisputed portion, and then move expeditiously to resolve the dispute over the remaining funds.
Hazard, The Law of Lawyering, § 8.23.
Model Rule 1.15(c) is a companion to Rule 1.15(b) . . . [w]hen there is a dispute as to what share a lawyer is to receive from trust funds being held by the lawyer, whether the dispute is with a client or a third party, the lawyer must not take advantage of his physical control of the funds. Instead, he must disburse the undisputed share, as required by Rule 1.15(b), and keep safely segregated the remainder under Rule 1.15(c), until the dispute is resolved. Id. at § 19.7.
Gray, however, argues that once a dispute arises between an attorney and the client over funds held by the attorney, those funds need no longer be maintained in a separate interest bearing account because Colo. RPC 1.15(c) does not specifically refer to an interest bearing account. Colo. RPC 1.15(c) is broader in coverage than Colo. RPC 1.15(a) and (d). It applies to property of any kind in the possession of the attorney over which two or more entities claim an interest, regardless of whether the client is one of the claimants or is not. If the client is one of the claimants, the more specific provisions of Colo. RPC 1.15(a) and (d) apply as well. Colo. RPC 1.15(a) and (d) unequivocally require funds to which the client asserts a claim to be placed in an interest bearing account so long as they remain under the control of the attorney.
Gray also argues, however, that the assertion of the attorney’s charging lien under § 12-5-119 C.R.S., 4 C.R.S. (2000) altered her duties and responsibilities under Colo. RPC 1.15. She contends that once she "asserted" the charging lien, she was free to expend the funds subject to the lien as her own funds. Gray and Field both testified that they had researched the attorney’s charging lien statute, had reviewed an article, Cowden, T., Perfection and Enforcement of Attorney’s Liens in Colorado, 26 Colo. Law. 57 (March 1997) and one Colorado case, In re Marriage of Berkland, 761 P.2d 779 (Colo. App. 1988) and had come to the conclusion that they were entitled to use the garnished funds as their own up to the amount of their claimed legal fee statements. Although the operation of the attorney’s lien statute is less than clear, the authorities relied upon by Gray do not authorize an attorney to simply assert an attorney’s lien and commence spending the funds upon which the lien is asserted. An attorney’s lien, like other liens, merely places others on notice that someone claims an interest in the funds subject to the lien and must be reduced to judgment before title to the liened property is transferred. Even if Gray and/or Field had fully complied with the provisions of the attorney’s charging lien statute, the garnished funds at issue remained the property of American Banco until the lien was reduced to judgment. Field, with Gray’s knowledge and approval, however, began spending the garnished funds long before any court had reduced the lien to judgment.
Although Field and Gray’s attempt to assert an attorney’s charging lien against the garnished funds may have had the effect of placing the funds into the category of disputed funds, it did not relieve Gray from the requirements of Colo. RPC 1.15(a) and (d). Until the lien was reduced to judgment, the funds remained the property of the client, American Banco, subject to a lien, and had to be maintained in an interest bearing account. Because Gray did not do so, her conduct violated Colo. RPC 1.15(d).
Once Field was suspended, Gray assumed the responsibility of supervising his activities in conjunction with her practice of law and was required to make reasonable efforts to ensure that Field’s conduct was compatible with her professional obligations. It was Gray’s responsibility to hold the property of American Banco, not Field’s. See Colo. RPC 1.15(a). Notwithstanding her obligation, Gray delegated that responsibility to Field and allowed Field to open an account intended to hold the disputed funds upon which she was not a signatory and to deposit client funds into that non-interest bearing account in contravention of the requirements of Colo. RPC 1.15(d). Allowing Field to open such an account in violation of Colo. RPC 1.15(d) was not reasonable in light of Gray’s duties and responsibilities as the supervising attorney. For a period of nearly a month, Gray was aware that disputed client funds were on deposit in a non-interest bearing account over which she had no control. Consequently, Gray also violated Colo. RPC 5.3(b).7
Claim 4 of the Complaint alleges that Gray violated Colo. RPC 1.15(c) by failing to keep the disputed funds separate until the dispute was resolved and Colo. RPC 8.4(c)(engaging in conduct involving dishonesty, fraud, deceit or misrepresentation) by utilizing a portion of the garnished funds while they remained in dispute. Colo. RPC 1.15(c) requires that disputed funds be held separately until the dispute is resolved. Gray did not do so. She allowed Field to withdraw and expend approximately $9,507.00 of the disputed funds. By so doing, she violated Colo. RPC 1.15(c).
The charge under Colo. RPC 8.4(c) is based upon the People’s theory that Gray allowed the conversion of a portion of the disputed American Banco funds. Conversion is defined in People v. Varallo, 913 P. 2d 1 (Colo. 1996) as follows:
Knowing misappropriation [for which the lawyer is almost invariably disbarred] "consists simply of a lawyer taking a client’s money entrusted to him, knowing that it is the client’s money and knowing that the client has not authorized the taking." In re Noonan, 102 N.J. 157, 160, 506 A.2d 722 (1986). Misappropriation includes "not only stealing, but also unauthorized temporary use for the lawyer’s own purpose, whether or not he derives any personal gain or benefit therefrom." In re Wilson, 81 N.J. 451, 455 n. 1, 409 A.2d 1153 (1979). The motive of the lawyer is irrelevant in determining the appropriate discipline for knowing misappropriation.
Moreover, "[i]ntent to deprive permanently a client of misappropriated funds, however, is not an element of knowing misappropriation." In re Barlow, 140 N.J. 191, 657 A.2d 1197, 1201 (1995).
A "technical conversion," usually warranting suspension rather than disbarment, is a conversion or misappropriation where the complainant either concedes that the misappropriation was negligent, People v. Dickinson, 903 P.2d 1132, 1138 (Colo.1995), or it cannot be proven by clear and convincing evidence that the respondent knowingly converted the funds, People v. Galindo, 884 P.2d 1109, 1112 (Colo.1994) (board’s conclusion that conversion was negligent rather than knowing was supported by the record and would not be overturned); People v. Wechsler, 854 P.2d 217, 220-21 (Colo.1993) (supreme court will not overturn hearing board’s conclusion that intentional conversion was not established by clear and convincing evidence unless there is no substantial evidence in the record to support conclusion); People v. McGrath, 780 P.2d 492, 493 (Colo. 1989)("Indeed, if there were not some lingering doubt about whether the respondent engaged in knowing conversion of his client’s funds, we would have no hesitation in entering an order of disbarment").
Varallo, 913 P.2d at 10-11.
The evidence is clear and convincing that a portion of the disputed funds were withdrawn and expended by Field, with Gray’s knowledge, prior to the time either Field or Gray were entitled to do so.8 The evidence is also equally clear that Gray was convinced that she was entitled to withdraw and use the disputed funds at the time she authorized Field to do so based upon her misunderstanding of the law relating to attorney’s charging liens and the applicability of The Rules of Professional Conduct. Notwithstanding her misunderstanding, the misconduct involved the taking of money claimed by the client which the client had not authorized and, as such, constitutes conversion. Because Gray was under the misapprehension that she and Field were entitled to the money, however, her misconduct is negligent rather than knowing. The conversion, under the analysis set forth in Varallo, supra, is therefore technical rather than knowing. Gray’s conduct violated Colo. RPC 8.4(c).
III. ANALYSIS OF DISCIPLINE
The state of mind of the attorney, the degree of harm or potential harm resulting from the misconduct, the impact of the misconduct on the profession, the protection of the public and the mitigating and aggravating factors are the primary considerations evaluated in arriving at the appropriate sanction in this case. The misconduct in this case can be summarized as follows: an inexperienced attorney, dominated by an experienced but suspended attorney, (1) failed to utilize appropriate letterhead in correspondence identifying that the experienced attorney had been suspended, (2) failed to properly supervise the suspended attorney in connection with the handling of disputed funds and allowed the suspended attorney to withdraw and expend disputed funds during the period of dispute which were later determined to belong to the suspended attorney. The evidence presented established that the client was not misled by the letterhead, did not suffer nor was exposed to any potential injury as a consequence of the attorney’s actions and the course of action undertaken by the attorney followed research, though faulty, of the applicable law.
The ABA Standards for the Imposition of Lawyer Sanctions (1991 & Supp. 1992) give guidance in arriving at the presumptive sanction in disciplinary proceedings. Gray’s misconduct violated duties to the client and duties to the profession. ABA Standard 4.12, 4.13 and 4.14, which apply to violations of duties owed to the client, provide:
4.12 Suspension is generally appropriate when a lawyer knows or should know that he is dealing improperly with client property and causes injury or potential injury to a client.
4.13 Reprimand (public censure) is generally appropriate when a lawyer is negligent in dealing with client property and causes injury or potential injury to a client.
4.14 Admonition (private admonition) is generally appropriate when a lawyer is negligent in dealing with client property and causes little or no actual or potential injury to a client.
ABA Standards 4.62, 4.63 and 4.64 apply when an attorney lacks candor in communications with a client:
4.62 Suspension is generally appropriate when a lawyer knowingly deceives a client, and causes injury or potential injury to the client.
4.63 Reprimand [public censure] is generally appropriate when a lawyer negligently fails to provide a client with accurate or complete information, and causes injury or potential injury to the client.
4.64 Admonition [private admonition] is generally appropriate when a lawyer engages in an isolated instance of negligence in failing to provide a client with accurate information, and causes little or no actual injury to the client.
ABA Standards applying to violations of duties to the profession, 7.2, 7.3 and 7.4 provide:
7.2 Suspension is generally appropriate when a lawyer knowingly engages in conduct that is a violation of a duty owed to the profession, and causes injury or potential injury to a client, the public or the legal system.
7.3 Reprimand [public censure] is generally appropriate when a lawyer negligently engages in conduct that is a violation of a duty owed to the profession, and causes injury or potential injury to a client, the public, or the legal system.
7.4 Admonition [private admonition] is generally appropriate when a lawyer engages in an isolated instance of negligence in determining whether the lawyer’s conduct violates a duty owed to the profession, and causes little or no actual or potential injury to a client, the public, or the legal system.
In light of the fact that Gray’s misconduct was negligent, involved only one client and caused little or no actual harm to either the client, the profession or the legal system, the ABA Standards suggest that the presumptive sanction is private admonition. A review of Colorado case law, however, suggests that the sanction for technical conversion of funds is misconduct of a more serious nature, even if negligent, and deviates from the ABA Standards’ recommendation of private admonition. See People v. Shidler, 901 P.2d 477, 479 (Colo. 1995)(public censure imposed on attorney for technical conversion of client funds where court considered as mitigation attorney’s diagnosis of mental disorder which caused conduct); People v. Galindo, 884 P.2d 1109, 1112 (Colo. 1994)(suspending the attorney for one year and one day where "respondent’s mishandling of funds was the result of neglect rather than dishonesty"); People v. Wechsler, 854 P.2d 217, 223 (Colo. 1993) (attorney suspended for one year and one day for technical conversion of client funds, failure to deposit funds in trust account and failure to return files upon request); cf. People v. O’Donnell, 955 P.2d 53, 59 (Colo. 1998)(imposing public censure on attorney respondent pursuant to conditional admission of misconduct for, among other rule violations, failing to promptly refund unearned fees, holding that a public censure is generally warranted "when a lawyer is negligent in dealing with client property and causes injury or potential injury to a client"); People v. Pooley, 917 P.2d 712, 713 (Colo. 1996)(public censure imposed on respondent attorney pursuant to conditional admission of misconduct for, among other rule violations, failing to refund unearned retainer upon demand, and issuing check drawn on insufficient funds in violation of Colo. RPC 1.15(a) (failure to keep client funds separate from the lawyer’s own funds), and Colo. RPC 8.4(c) (engage in conduct involving dishonesty, fraud, deceit, or misrepresentation) and finding that public censure was warranted where there was no harm to third parties); People v. Mills 861 P.2d 708, 711 (Colo. 1993)(imposing public censure on respondent attorney for improperly asserting a charging lien over client’s share of estate proceeds and thereby violating prior rule DR1-102(A)(5), current Colo. RPC 8.4(d)(engaging in conduct prejudicial to the administration of justice) and dismissing charges of failing to promptly deliver funds to client in possession of lawyer or charges of dishonesty, fraud, deceit or misrepresentation); People v. Smith, 830 P.2d 1003, (Colo. 1992) (respondent attorney suspended for six months for, among other rule violations, filing improper lien against marital residence).
Examination of aggravating and mitigating factors pursuant to 9.22 and 9.32 respectively may enhance or diminish the ultimate sanction. The People argued that Gray engaged in this conduct with a selfish or dishonest motive, see id. at 9.22(b), her actions reflect a pattern of misconduct, see id. at 9.22(c), and she engaged in multiple offenses, see id. at 9.22(d). The PDJ and Hearing Board find no evidence that Gray engaged in the misconduct with a selfish or dishonest motive. Her conduct arose out of a belief that American Banco owed the money to Field, that the Colorado attorney’s lien statute authorized her action and that her conduct was in conformity with The Rules of Professional Conduct. Neither does her misconduct show a pattern of misconduct. The several violations supported by the evidence arose from dealings in a single dispute with a single client over a relative short period of time. Establishing a pattern of misconduct requires evidence of routine and course of conduct reflecting a willingness to repeatedly engage in similar misconduct. Because the People have proven several violations, however, they have established the single aggravating factor of multiple offenses pursuant to ABA Standards 9.22(d).
By way of mitigation, Gray had no prior disciplinary record, see id. at 9.32(a), there is an absence of a dishonest or selfish motive, see id. at 9.32(b), there was full and free disclosure to the disciplinary authorities, see id. at 9.32(e), Gray was very inexperienced in the practice of law, having been admitted to the bar in 1996 and having no prior experience as a lawyer before the events at issue in this case, see id. at 9.32(f), there has been a delay in the disciplinary proceedings not due to Gray’s actions, see id. at 9.32(i), and she expressed and displayed remorse for her actions see id. at 9.32(l).
The most significant factor in the PDJ and Hearing Board’s arriving at this sanction decision is Gray’s inexperience in the practice of law: she had virtually no experience at the time these events occurred. This, combined with the fact that although she freely acknowledged it was her responsibility to ensure compliance with The Rules of Professional Conduct, she was heavily influenced by Field, a seventeen year veteran of the practice of law, in interpreting the scope and applicability of the rules and the breadth of the attorney’s lien statute. Although this decision does not excuse Gray’s submission to Field’s influence, it cannot and should not be ignored in evaluating the need to protect the public from further misconduct by Gray.
Taking into account the ABA Standards’ presumptive sanction, the more rigorous sanction derived from Colorado law, and the significant mitigating factors, it is the conclusion of the PDJ and Hearing Board that Gray should be assessed a public censure.
IV. ORDER AND IMPOSITION OF SANCTION
It is therefore ORDERED:
1. Marci S. Gray is hereby assessed a PUBLIC CENSURE.
2. Respondent is ORDERED to pay the costs of these proceedings;
3. The People shall submit a Statement of Costs within fifteen (15) day of the date of this Order. Respondent shall have ten (10) days thereafter to submit a response thereto.
1. Neither the letterhead nor billing statements of Field & Associates disclosed that Field was suspended from the practice of law.
2. None of the letters sent by Field or Field and Gray on "Field & Associates" letterhead made any reference to the fact that Field was suspended from the practice of law.
3.Gray contended and Field testified that it was their understanding that only those portions of the fee statements relating to telephone conversations were in dispute and they kept approximately $2,000 in reserve in the escrow account to cover the amount attributable to telephone call charges. Both LaSpada’s testimony and the surviving documentation strongly indicate that LaSpada disputed all portions of the fee statements. The PDJ and Hearing Board found LaSpada’s testimony to be more credible than Field’s and find that all portions of the fee statements were in dispute.
4. Prior Colorado disciplinary opinions have recognized that a lawyer who has been suspended or disbarred may perform services as a paralegal. See Goff v. State of Colorado, No. 00PDJ023, slip op. at 5 (Colo. PDJ August 2000) 29 Colo. Law 126, 128 (October 2000)(2000 Colo. Discipl. LEXIS 7); McCaffrey v. State of Colorado, No. 99PDJ108, slip op. at 3 (Colo. PDJ March, 2000) 29 Colo. Law 109, 110 (May 2000) (2000 Colo. Discipl. LEXIS 4); Varallo v. State of Colorado, No. 99PDJ071, slip op. at 28 Colo. Law. 136 (November, 1999) (1999 Colo. Discipl. LEXIS 11); but see Denver Bar Ass’n v. Public Utilities Commission, 391 P.2d 467 Colo. 1964)(defining what constitutes the unauthorized practice of law).
5. Colo. RPC 7.1 provides in relevant part that a "communication is false or misleading if it: (a) contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading; (b) is likely to create an unjustified expectation about results the lawyer can achieve, or states or implies that the lawyer can achieve results by means that violate the rules of professional conduct or other law; or (c) compares the lawyer’s services with other lawyers’ services, unless the comparison can be factually substantiated."
6. Reliance and the consequential injury arising from that reliance, if any, may be considered in determining the appropriate sanction once a violation has been found.
7. The charged violation of Colo. RPC 8.4(h)(other conduct adversely reflecting on fitness to practice law) was pled in the alternative to the Colo. RPC 1.15(d) and Colo. RPC 5.3(b) charges. Accordingly, having found a violation of the two Rules, the charge under Colo. RPC 8.4(h) is dismissed.
8. The fact that a court subsequently determined that more than the amount taken by Field and Gray was due and owing under prior legal fee statements does not alter the violation analysis. That analysis must be conducted as of the time the conduct occurred.
Case Number: 00PDJ009
THE PEOPLE OF THE STATE OF COLORADO
CRAIG WILLIAM MERCER
ORIGINAL PROCEEDING IN DISCIPLINE BEFORE
THE OFFICE OF THE PRESIDING DISCIPLINARY JUDGE
May 25, 2001
OPINION AND ORDER DISMISSING CLAIMS
Opinion issued by Presiding Disciplinary Judge Roger L. Keithley and Hearing Board members, Frederick Y. Yu and Madeline A. Collison, both members of the bar.
CLAIMS AND CHARGES DISMISSED
This matter was heard on December 5, 6, and 7, 2000, before the Presiding Disciplinary Judge ("PDJ") and two hearing board members, Frederick Y. Yu and Madeline A. Collison, both members of the Bar. Charles E. Mortimer, Jr., Assistant Regulation Counsel, represented the People of the State of Colorado (the "People"). Alexander Rothrock represented the respondent, Craig William Mercer ("Mercer") who was also present. The People’s exhibits 1 through 14 were admitted into evidence. Respondent’s exhibits A through J, L through O, Q through U and W through Y were also admitted into evidence. The PDJ and Hearing Board heard testimony from the People’s witnesses Larry Tolley, Craig Mercer, Jack Strimbu, Laurence Canaday, Felicia Waddell and Luain T. Hensel. Mercer introduced testimony from Steve Bulmer, Jacqueline Tollerud, and character witnesses Robert B. Yegge, Michael Makaroff and James C. Coyle. Mercer also testified on his own behalf.
The evidence presented to the PDJ and Hearing Board in this disciplinary case presented two dramatically different versions of the same events. The outcome of this proceeding is dependent almost entirely upon the assessment of credibility of the witnesses who testified.
The PDJ and Hearing Board considered argument of counsel, the exhibits admitted, assessed the credibility of the witnesses, and made the following findings of fact which were established by clear and convincing evidence.
I. FINDINGS OF FACT
Case No. 00PDJ009
On July 4, 1997, Coleman Moore was involved in an automobile collision. Larry Tolley, a passenger in the Moore car, suffered a closed head injury and was otherwise seriously injured. Moore had no insurance at the time of the collision. Moore was criminally charged as a result of the incident. Moore retained Mercer to represent him on the charges.
As a result of his injuries, Tolley was placed in a medically-induced coma. He remained hospitalized throughout the remainder of July and thereafter underwent a month of in-patient rehabilitation. Tolley suffered memory loss and other cognitive dysfunction. Throughout the initial two-month period of his convalescence, Tolley was heavily medicated, occasionally exhibited bizarre and extreme behavior and, by his own admission, was in a "haze." Tolley’s recall of events which transpired during that period of time is, at best, spotty.
In either late July or early August, Tolley became aware that Mercer was representing Moore on the criminal charges. Tolley called Mercer on at least one and possibly several occasions during that period of time to defend his friend, Moore, and provide information to Mercer which Tolley wanted to convey. Tolley also complained to Mercer about his medical treatment and his inability to obtain payment of his medical care by his insurance company.
Tolley was subpoenaed as a witness for the prosecution at Moore’s preliminary hearing. On September 30, 1997, Tolley responded to the subpoena and appeared in court. Mercer and Moore were also present. Although the evidence is clear that Mercer and Tolley had a discussion outside of the courtroom that day in which they discussed the status of Tolley’s efforts to recover from his insurance company, it cannot be determined by clear and convincing evidence whether Tolley or Mercer initiated that portion of the conversation relating to Tolley’s insurance. At some point in the conversation, however, Mercer told Tolley that if he wanted Mercer’s assistance, Tolley could call him at the office, make an appointment and they would discuss the matter. Mercer gave Tolley his business card.
Shortly thereafter, Tolley did make an appointment to see Mercer. They met in Mercer’s office on October 3, 1997. After interviewing Tolley, Mercer presented him with a contingent fee agreement and Tolley signed the agreement and left the office. Within two hours, Mercer realized that his representation of Moore on the criminal charges and Tolley in connection with the injuries he suffered in the incident posed a conflict of interest which he had not discussed with Tolley. Mercer prepared a letter to Tolley in which he rescinded the contingent fee agreement, explained to Tolley that there was a conflict of interest in the two representations and advised Tolley that Mercer had referred the case to another lawyer, Laurence Canaday. The letter stated that Canaday would be contacting Tolley regarding the representation. Mercer gave the letter to his secretary, Jacqueline Tollerud, to place in the mail to Tolley. Tollerud either mailed or hand-delivered the letter to both Tolley and Canaday. Tolley denied he received the letter rescinding the contingent fee agreement. Canaday also denied receiving the rescission letter.
Canaday and Mercer were law school classmates. Canaday had experienced some difficulty successfully completing the Colorado bar examination. Mercer came to Canaday’s aid and assisted him in preparing for the re-examination. Thereafter, Mercer referred some cases to Canaday, co-counseled with Canaday on three cases, allowed Canaday to meet with clients at his office, provided him with legal forms, loaned him legal research resources, discussed cases with him and provided some measure of secretarial support, through Ms. Tollerud, for Canaday’s representation of clients. On at least one occasion prior to the Tolley matter, Mercer had referred a personal injury client to Canaday, assisted Canaday in the preparation of the case, referred Canaday to Jack Strimbu, an independent insurance claims consultant, provided office support and research resources and allowed Canaday to utilize Ms. Tollerud’s secretarial skills in the prosecution of that case.
Jack Strimbu had a lengthy background working with insurance companies adjusting claims. Strimbu had been previously employed by at least two national insurance companies for many years, had worked as a legal assistant for four years in a law firm assisting the resolution of insurance related claims and for some time had offered his services as a consultant to attorneys in resolving insurance related cases. Strimbu had worked on over fifty cases with Mercer prior to the Tolley case. Strimbu’s normal practice when engaged to assist an attorney was to evaluate coverage, prepare correspondence on the lawyer’s letterhead to the insurance company for the lawyer’s review and signature, consult with the lawyer concerning insurance-related issues, recommend courses of action regarding insurance, suggest settlement value and, in general, provide the lawyer with his experience and expertise in obtaining as favorable settlement under insurance coverage as possible for the lawyer’s client. Strimbu testified that all of his work was supervised by the lawyer for whom he provided his services.
Strimbu normally billed the attorneys he consulted with on an hourly basis, but deferred payment of his bill until the insurance proceeds were received. It was his practice that if no insurance proceeds were received, he would not require payment of his bill for services. In effect, payment for his services was contingent upon the outcome of the case upon which he was working.
In the earlier case in which Strimbu had consulted with Canaday, Canaday had provided Strimbu with a supply of his letterhead upon which Strimbu was to prepare correspondence for Canaday’s review and signature.
Although both Canaday and Tolley testified that they never spoke to one another concerning Canaday’s representation of Tolley, on October 7, 1997, Strimbu prepared a letter on Canaday’s letterhead to an insurance claim service in connection with Tolley’s claim for Personal Injury Protection ("PIP") benefits. The letter identified Canaday as Tolley’s attorney, requested documentation regarding Tolley’s medical treatment and had attached a release signed by Tolley which Mercer had obtained in his initial interview with Tolley prior to rescission of the contingent fee agreement. As in Strimbu’s earlier work with Canaday, Strimbu delivered the letter to Mercer’s office for review by Canaday. At that time, Canaday was working out of Mercer’s office and materials delivered to the office would be available to Canaday. When the letter was delivered, Mercer reviewed the letter and signed Canaday’s name on the signature line with a notation that it had been signed by Mercer.
Thereafter, Strimbu prepared numerous letters on Canaday’s letterhead, most of which were signed by Canaday and forwarded to the intended recipient in connection with either Tolley’s PIP claims or uninsured motorist insurance coverage. Responses to these letters were mailed to Canaday at an address other than Mercer’s office address. One of the letters prepared by Strimbu on Canaday’s letterhead, dated October 20, 1997, was a demand for settlement at policy limits of $25,000, and had a signature block for Canaday, but was not signed. Strimbu testified he discussed the demand with Canaday before the letter was forwarded. Canaday does not recall that discussion. By early November 1997, the insurance company had agreed to pay policy limits of $25,000, under its uninsured motorist coverage to Tolley for his injuries.
An insurance check in the amount of $25,000 for Tolley’s settlement of the Uninsured Motorist coverage was endorsed and deposited into Canaday’s trust account by Canaday on November 6, 1997. Tolley signed a release in favor of the insurance company which was notarized by Tollerud and received 65% of the $25,000 less expenses of $160.18, most of which had been incurred by Strimbu. Strimbu received $4,084.15 which covered his time, expenses and an estimate of future expenses for his continuing work on Tolley’s PIP claim. Mercer received $4,026.03, which he claimed was the payment for services he had provided to Canaday in connection with his efforts to help Canaday begin a law practice, and Canaday received $800. The settlement statement signed by Tolley at the time of disbursement is on Canaday’s letterhead. The original release was returned to the insurance company with a cover letter on Canaday’s letterhead prepared by Strimbu and signed by Canaday.
Thereafter, at least two letters on Canaday’s letterhead, one signed by Canaday and one unsigned, were sent to the insurance representatives in connection with efforts to resolve the PIP payment issues. Moreover, at least two additional letters, the latest of which is dated May 21, 1998, were sent from the insurance representatives to Canaday at his home address regarding the Tolley matter. In the interim, Tolley had become disenchanted by the amount of money he received in the settlement, didn’t understand why 35% of the settlement had been deducted from the settlement check when no trial had taken place and, on July 27, 1998, filed a Request for Investigation ("RFI") with the then Office of Disciplinary Counsel. Mercer was informed of the RFI by letter dated September 16, 1998. Mercer contacted Canaday and discussed Tolley’s allegations with him. Immediately thereafter, on September 24, 1998, Canaday sent a letter to Mercer regarding the Tolley case and one other case in which he stated "please let me know how you wish to notify Mr. Tolley and (second individual) of my withdrawal from their cases as their attorney as soon as possible."
Although the facts set forth above are substantially undisputed, the remainder of the facts are not. It was the People’s theory and Canaday’s testimony that Mercer asked Canaday to merely open a trust account for the deposit and disbursement of the Tolley settlement proceeds, and to provide letterhead for use with the insurance company. The theory contends that Canaday was simply used as a straw man to allow Mercer to avoid detection on the conflict of interest problem arising from his representation of both Moore and Tolley. Canaday testified that he was paid $800 out of the settlement proceeds for the use of his letterhead and trust account and that he had no other involvement in the Tolley case other than attending the closing and signing some letters. Canaday, although admitting that Mercer had provided office and staff support, forms, consultation and other assistance to him, denied there was any agreement to pay for such assistance and denied that he was indebted to Mercer prior to the Tolley settlement.
Mercer, on the other hand, testified that after he prepared the letter rescinding his contingent fee agreement, he had no further involvement in the Tolley case apart from signing Canaday’s name to the initial request letter to the insurance company and attending the settlement closing in which he received a portion of the disbursement. Mercer did acknowledge that as Moore’s attorney, on October 18, 1997, he obtained an affidavit from Moore stating that Moore had no insurance at the time of the accident and that the affidavit was provided to Strimbu. Mercer claims that the $4,084.15 he received from the Tolley settlement proceeds were in payment of services he provided to Canaday in connection with a computer billing program, use of his office, staff and research resources and other aid he provided to Canaday in his efforts to assist Canaday getting started in the practice of law. Mercer acknowledged that there was no formal agreement between himself and Canaday to pay for those services but felt that the amount he received was less than the fair value of the services he had provided. Mercer could not provide documentation or a detailed breakdown of how the $4,084.15 was calculated.
Strimbu’s testimony was consistent with Mercer’s. Strimbu always understood Canaday to be the responsible attorney on the Tolley case, looked to Canaday for payment for his services and prepared all of the Tolley correspondence for Canaday’s review and signature. Strimbu testified that he spoke with Canaday about the Tolley case on several occasions and took direction from him. Strimbu acknowledged that he held Mercer in high regard, considered him a major client and still consults on cases with him.
Jacqueline Tollerud, Mercer’s legal secretary at the time who had thirty-six years’ experience, testified that she recalled Mercer dictating the Tolley letter rescinding the contingent fee agreement and her preparation of the document. She recalls providing a copy to Tolley, and testified that she did no work on the Tolley case for Mercer after October 3, 1997, the date the letter was prepared. Ms. Tollerud recalled Canaday spent substantial amounts of time in Mercer’s office in 1997, obtaining legal forms from her, asked her to prepare pleadings in his cases, made phone calls from Mercer’s office in his absence and talked with Mercer about cases. Ms. Tollerud also testified that after Tolley received his settlement funds, he continued to call for Mercer in order to complain about the delay in obtaining PIP payments on his medical bills and that she, at Mercer’s direction, always referred Tolley to Strimbu and Canaday. Ms. Tollerud also testified that she did not prepare the settlement disbursement sheet or the settlement disbursement checks in the Tolley case contrary to her normal practice on Mercer’s cases.
Case No. 00PDJ037
Mercer represented Felicia Waddell in connection with a child visitation matter in June 1998. Waddell had been divorced from Bradley Waddell in the state of Georgia in 1991. There were two minor children of the marriage at the time of the divorce. Subsequently, Waddell and the children moved to Colorado. Pursuant to an order issued in the Georgia divorce proceedings, Bradley Waddell was to have specific parenting time in the state of Georgia each year, including each summer. In June 1998, Bradley Waddell sent plane tickets to Waddell for the children to travel to Georgia for the court-ordered parenting time. The children did not want to travel to Georgia for the 1998 summer visitation.
Waddell met with Mercer on June 26, 1998. By that time she was already in violation of the Georgia visitation order. At that meeting she advised respondent of the terms of the Georgia visitation order. Waddell was upset and predisposed to withhold the children’s court-ordered visitation to Georgia. Mercer did not advise Waddell to violate the Georgia order; rather, he advised her that she had the "option" of disobeying the court order and explained the consequences which might flow from such conduct.
On June 26, 1998, Mercer sent a letter to Mr. Waddell returning the plane tickets, advising Mr. Waddell that the children were not coming and suggesting that a dialogue be undertaken to resolve the visitation dispute. The children did not travel to Georgia for the court-ordered visitation and Waddell was eventually held in contempt of the visitation order.
II. CONCLUSIONS OF LAW
Case No. 99PDJ009
The conclusions of law derived from the findings of fact in this case are almost totally dependent upon the perceived credibility of the witnesses.
Count one of the Complaint charges that Mercer solicited Tolley as a client at the scheduled preliminary hearing in the Moore case in violation Colo. RPC 7.3(a). Colo. RPC 7.3(a) provides:
A lawyer shall not either in person or by live telephone contact, solicit professional employment from a prospective client with whom the lawyer has no family or prior professional relationship where a significant motive for the lawyer’s doing so is the lawyer’s pecuniary gain.
Mercer and Tolley gave substantially different versions of the manner in which discussion of Tolley’s legal problems arose. Tolley, however, admitted that he was in a "haze" during that period of time, had no recollection of various other events which occurred at or about the same time, and initially denied having any conversations with Mercer prior to Moore’s preliminary hearing. Mercer, however, recalled several phone calls from Tolley before the hearing, and recalled earlier discussions regarding Tolley’s difficulties in getting health care bills paid and support for Moore’s predicament. Ultimately, Tolley admitted in his testimony that there may have been prior phone calls and that the decision for Mercer to meet with him was "mutual." Proof of this claim depends exclusively upon the accuracy of Tolley’s recall. Tolley’s admitted "haze," coupled with his changing version of events, raises serious questions regarding the accuracy of that recall. Consequently, the PDJ and Hearing Board cannot conclude by clear and convincing evidence that Mercer’s conduct violated Colo. RPC 7.3(a) and therefore dismiss that charge.
Count two of the Complaint charges Mercer with violations of Colo. RPC 1.7(a)(a lawyer shall not represent a client if the representation of that client will be directly adverse to another client) and (b)(a lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person, or by the lawyer’s own interests) arising from his representation of both Moore and Tolley. The People contend that Mercer surreptitiously represented Tolley using Canaday as a straw man while simultaneously representing Moore on criminal charges arising out of the same factual events. It is undisputed that Mercer entered into a contingent fee agreement with Tolley and an attorney/client relationship came into existence. The existence of an attorney/client relationship is an element which must be established to prove a violation of Colo. RPC 1.7(a) or (b). It is not, however, the only element. Both Colo. RPC 1.7(a) and (b) are crafted in terms of "representation." Representation, as envisioned by those rules, is broader than the mere creation of the attorney/client relationship. It requires some affirmative act on the part of the lawyer to benefit the client. Whether Mercer engaged in affirmative acts on behalf of Tolley depends upon the analysis of credibility which is also implicit in the remaining counts of the Complaint.
Count three of the Complaint alleges a violation of Colo. RPC 8.4(c) (engaging in conduct involving dishonesty, fraud, deceit or misrepresentation) premised upon Mercer’s representation to the Office of Disciplinary Counsel that he rescinded the Tolley contingent fee agreement on October 3, 1997. Mercer admits that he made such a statement.
Count four of the Complaint alleges that Mercer split legal fees with Strimbu and aided Strimbu in the unauthorized practice of law in connection with the Tolley matter in violation of Colo. RPC 5.4(a)(a lawyer or law firm shall not share legal fees with a nonlawyer) and 5.5(b)(assisting a person who is not a member of the Colorado bar in the performance of activity that constitutes the unauthorized practice of law), respectively. The splitting of legal fees is premised upon the People’s contention that Mercer continued to represent Tolley through settlement of his claim, took the 35% contingency as authorized in the contingent fee agreement he and Tolley signed, and shared that contingent fee with Strimbu. The unauthorized practice of law claim is based upon the People’s theory that Strimbu negotiated Tolley’s claim directly with the insurance company without supervision while working with Mercer on that case.
The final count, count five, alleges that Mercer failed to assist Tolley in obtaining payment of all of his medical bills and therefore violated Colo. RPC 1.3 (neglect of a legal matter). As with the earlier claims, the determination of this count depends upon whether Mercer surreptitiously continued as Tolley’s attorney as alleged by the People or rescinded the contingent fee agreement and handed the case over to Canaday as contended by Mercer.
With regard to counts two, three, four and five, the PDJ and one Hearing Board member conclude that the People have not proven by clear and convincing evidence that Mercer surreptitiously continued as Tolley’s attorney as they contend. That conclusion is based upon the relative credibility of Canaday, Mercer, Strimbu and Ms. Tollerud. Canaday, Mercer and Strimbu all have vested interests in their respective version of events and their perception of those events must be considered in light of their interests. Canaday’s testimony was not credible: he testified that he voluntarily allowed Mercer and Strimbu to misuse his letterhead and deceive the insurance company, thus alleging that he was not Tolley’s attorney while, at the same time, he admits that he financially participate in the settlement is not credible. Much of Canaday’s testimony was internally inconsistent, at variance with common experience and contrary to the documentary evidence. Moreover, Canaday freely acknowledged that his involvement in this case was an effort to protect himself. The PDJ and one Hearing Board member give little, if any, weight to Canaday’s version of events. Absent Canaday’s supporting testimony, the People’s contention that Mercer continued as Tolley’s attorney must be inferred solely from the existence of the contingent fee agreement coupled with the fact that Mercer did receive some portion of the settlement proceeds. Those facts standing alone, in light of the explanations advanced by Mercer both as to the recession of the contingent fee agreement and the basis for his receipt of some portion of the settlement proceeds are insufficient from which to draw a conclusion by clear and convincing evidence that Mercer continued as Tolley’s attorney beyond October 3, 1997. Although Mercer could not document Canaday’s indebtedness to him, the lack of documentation goes to the weight to be given to the evidence and does not require that the evidence to be ignored.
Of substantial importance to this decision is the credible testimony of Ms. Tollerud. Ms. Tollerud is the only significant witness to the Tolley events who has no interest in the outcome of these proceedings. Her testimony is given significant weight in reaching the decision that Mercer did not continue as Tolley’s attorney beyond October 3, 1997. Ms. Tollerud confirmed the letter had been prepared and sent to both Canaday and Tolley. She confirmed that Canaday regularly used Mercer’s office, staff, telephone, forms and research resources. Of particular importance is her testimony that she did not prepare the Tolley settlement documentation, contrary to her normal duties in a Mercer case, and that she performed no secretarial duties for Mercer in connection with that case after October 3 apart from referring Tolley’s repeated phone calls to Canaday and Strimbu.
Absent substantially greater proof that Mercer continued in his representation of Tolley beyond the October 3, 1997 rescission letter, each of the charges in counts two, three, four and five must fail. Count two, the conflict of interest charges under Colo. RPC 1.7(a) and (b) require some showing that Mercer continued in his representation of Tolley and performed some affirmative act on Tolley’s behalf. Absent Canaday’s version of events, there is no evidence that Mercer did so. What remains is evidence that a lawyer entered into a fee agreement with a client, realized that a conflict may exist which had not been disclosed and promptly rescinded the fee agreement.1 Although it would have been better for Mercer to consider the conflict issues before the contingent fee agreement was signed, under the facts of this case, his prompt rescission of the agreement and disclosure of the conflict is in accord with his responsibilities under Colo. RPC 1.7(a) and (b), not in violation of them.2 Accordingly the charges contained in Count Two of violations of Colo. RPC 1.7(a) and (b) are dismissed. Because Mercer’s representation to the Office of Disciplinary Counsel that he did not represent Tolley after October 3 has not been proven to be false at the time made, Count Three alleging a violation of Colo. RPC 8.4(c)(engage in conduct involving fraud, deceit, misrepresentation or dishonesty) is dismissed.
Count four alleging that Mercer split legal fees with Strimbu of necessity requires proof that the monies Mercer received were legal fees and that they were shared with Strimbu. The $25,000 in settlement of the Tolley matter did result in a disbursement, after deduction of costs, of 35% of the remaining amount for legal fees. Because we have concluded that it has not been proven that Mercer continued as Tolley’s attorney, that attorney fee disbursement is not attributable to Mercer.3 Accordingly, Mercer could not have split a fee to which he was not entitled with Strimbu or anyone else. Consequently, the charged violation in count four of Colo. RPC 5.4(a)(a lawyer shall not share legal fees with a nonlawyer) is dismissed.
Count four also alleges a violation of Colo. RPC 5.5(b), assisting Strimbu in the unauthorized practice of law. That charge, like the prior ones, is premised upon the theory that Strimbu was working with Mercer on the Tolley claim and Mercer allowed Strimbu to engage in conduct which rises to the level of practicing law; namely, negotiating an insurance settlement without attorney supervision. Although the evidence reveals substantial participation by Strimbu in the handling of Tolley’s claim through correspondence, he submitted his work to Canaday for review and Canaday signed the letters involved with one exception. As to that exception, Strimbu credibly testified that he discussed its content with Canaday prior to its transmittal. Under these facts, we cannot conclude by clear and convincing evidence that Strimbu acted without supervision nor that Mercer was charged with the responsibility of supervising his work. Accordingly, the charged violation of Colo. RPC 5.5(b) is dismissed.
The final count, count five, contends that Mercer neglected Tolley’s legal matter because he did not "assist Mr. Tolley in obtaining payment of all of his medical bills" in violation of Colo. RPC 1.3. Since we have concluded that the evidence failed to prove that Mercer continued to represent Tolley beyond October 3, Mercer would have had no duty to pursue claims on Tolley’s behalf after that date based upon the unchallenged enforceability of the October 3 rescission of the contingent fee agreement. Accordingly, the charged violation of Colo. RPC 1.3 in count five is also dismissed.
Case No. 00PDJ037
The complaint alleges that Mercer violated Colo. RPC 8.4(d) as follows:
4. On June 29, 1998, the day she first met with the respondent, Ms. Waddell brought with her plane tickets that had been sent by Bradley Waddell for the children to accomplish their court-ordered summer visitation with him.
5. On June 29, 1998, the respondent mailed the plane tickets back to Mr. Waddell with a letter stating that the children would not be traveling to Georgia for their summer visitation, and inviting Mr. Waddell to engage in a dialogue concerning a revised visitation plan.
6. The respondent mailed the plane tickets to Mr. Waddell knowing that a Georgia court order was in effect which provided for the children’s summer visitation with their father.
The alleged violation of Colo. RPC 8.4(d) is premised upon: (1) respondent’s return of airline tickets provided to his client for court ordered visitation; (2) respondent’s notice to the husband that the children would not be coming to Georgia for the court ordered visitation, and (3) respondent’s request to engage in a dialogue concerning a revised visitation plan.
Colo. RPC 8.4(d) provides that "[i]t is professional misconduct for a lawyer to engage in conduct that is prejudicial to the administration of justice." In People v. Hotle, No. 99PDJ038, slip op. at 4-5 (Colo. PDJ October 16, 1999), 29 Colo. Law. 107, 108 (January, 2000) this court dismissed the alleged violation of Colo. RPC 8.4(d) against the respondent, stating:
No evidence was presented suggesting that [respondent’s] misconduct, although related to a pending court proceeding, prejudicially affected, delayed, interfered with or altered the course of that proceeding or, directly or indirectly, affected the administration of justice. A violation of Colo. RPC 8.4(d)(conduct prejudicial to the administration of justice), although covering a broad range of attorney misconduct, requires proof of some nexus between the conduct charged and an adverse effect upon the administration of justice.
See also People v. Wright, No. GC98C90 (Colo. PDJ May 4, 1999), 21 Colo. Law. 154, 155 (September 1999)(finding a violation of Colo. RPC 8.4(d) for attorney’s conduct which resulted in a direct disruption of pending proceedings); People v. Mannix, 936 P.2d 1285, 1287(Colo. 1997)(finding a violation of Colo. RPC 8.4(d) where attorney failed to appear at criminal proceeding).
The People characterize respondent’s conduct as assistance, support and facilitation of Waddell’s violation of the visitation order. In order to find a violation of Colo. RPC 8.4(d), it must be determined by clear and convincing evidence that the return of the plane tickets, the notice to the father that the children were not coming or Mercer’s invitation of dialogue, or some combination thereof, assisted, facilitated or supported the violation of the court visitation order.
The violation of the court visitation order arises from Ms. Waddell’s failure to allow the children to travel to Georgia for visitation. At the time Waddell first contacted Mercer, she was already in violation of the Georgia court order and sought legal advice on what to do. Mercer advised her of the consequences of her withholding visitation and provided recommendations regarding a course of action to minimize any consequences if she persisted in her predisposition not to send the two children on the mandated visitation. Waddell ultimately authorized Mercer to undertake that planned course of action and elected not to send the children. Although the Complaint characterizes Mercer’s involvement as assistance, facilitation or support for her decision to violate the order, the evidence does not support that conclusion.
It was Waddell’s decision to violate the order. Mercer, as her attorney, was charged with the obligation to inform her of the potential legal consequences of her intended course of action and did so. The fact that he took steps to minimize the potential consequences by returning the plane tickets, informing the husband that the children were not coming and inviting a dialogue does not further the client’s decision to violate the order; rather, it does what lawyers are supposed to do, expend efforts to minimize the potentially negative consequences of the acts of their clients. See generally Colo. RPC 1.2. The conduct involved in this case is not of the same nature as those cases where lawyers have been found to have violated Colo. RPC 8.4(d) in connection with assistance provided to clients facilitating their violation of court orders. See People v. Aron, 962 P.2d 261, 263 (Colo. 1998)(incompetent advice provided by an attorney and his client’s resultant conduct while acting upon that advice resulted in prejudice to the administration of justice); In the Matter of Kevin L. Scionti, 630 N.E. 2d 1358, 1360 (Ind. 1994)(finding a violation of Prof. Cond. R. 8.4(d) where attorney advised his client to violate a court order setting forth the terms and conditions of visitation).
Colo. RPC 8.4(d) has historically been applied to situations involving the violation of court orders by attorneys. See In re Bauder, 980 P.2d 507, 508 (Colo. 1999)(finding a violation of Colo. RPC 8.4(d) where attorney failed to obey a court order which required him to pay costs of a disciplinary proceeding); In the Matter of Hugen, 973 P.2d 1267, 1269 (Colo. 1999)(finding a violation of Colo. RPC 8.4(d) where attorney continued to practice law while under suspension and failed to notify the courts, the clients or opposing counsel of the suspension); People v. Harding, 967 P.2d 153, 155 (Colo. 1998)(finding a violation of Colo. RPC 8.4(d) for attorney’s willful violation of a court order concerning the payment of disputed funds into a trust account during the pendency of an action against him by another attorney); People v. Gonzalez, 967 P.2d 156, 157 (Colo. 1998)(finding a violation of Colo. RPC 8.4(d) where attorney failed to pay court-ordered maintenance and additional funds to former spouse resulting in a finding of contempt); People v. Crist, 948 P.2d 1020, 1021 (Colo. 1997)(finding a violation of Colo. RPC 8.4(d) for attorney’s violation of court orders in the course of abandoning his clients); People v. Theodore, 926 P.2d 1237, 1242 (Colo. 1996)(finding a violation of Colo. RPC 8.4(d) where attorney drove his client at the client’s request to the marital home in close proximity to the client’s estranged wife who had obtained a permanent restraining order against the attorney’s client); People v. Primavera, 904 P.2d 883, 885 (Colo. 1995)(finding a violation of prior DR 1-102(A)(5) and Colo. RPC 8.4(d) for failing to pay court-ordered child support). The PDJ and Hearing Board cannot find by a clear and convincing standard based on the facts presented that Mercer’s conduct assisted, supported, or facilitated Waddell’s violation of the visitation order. Accordingly, the charged violation of Colo. RPC 8.4(d) in Case No. 00PDJ037 is dismissed.
DISSENT by Frederick Y. Yu:
I respectfully dissent in part from the foregoing opinion and order dismissing the complaint in Case No. 00PDJ009. I concur with the portion of the opinion and order dismissing the complaint in Case 00PDJ037 (the Waddell case).
Case No. 00PDJ 009
The Tolley Case
The opinion characterizes the case as resting upon an assessment of the credibility of the witnesses who testified. I agree. After weighing the documentary evidence and testimony, I conclude, instead, that Mr. Mercer was not credible and that the documentary evidence in the record, supported by Mr. Canaday’s testimony is the only credible explanation for the undisputed sequence of events that occurred.
Mr. Mercer represented Mr. Moore on criminal charges arising out of his automobile accident in which Mr. Tolley suffered injury as a passenger. Given this fact, it was a conflict of interest for Mr. Mercer also to represent Mr. Tolley, Mr. Moore’s passenger, in a claim against Mr. Moore (or his insurer) seeking recovery for his injuries. Mr. Tolley’s significant physical injuries and substantial hospital and medical bills made it easy for Mr. Tolley to claim the policy limits available under Mr. Moore’s uninsured motorist coverage of $25,000. Notwithstanding this conflict, Mr. Mercer undertook to represent Mr. Tolley. There is no evidence that Mr. Mercer consulted with either client about the subject of conflict before undertaking to represent Mr. Tolley.
It is undisputed that Mr. Mercer and Mr. Tolley executed a contingent fee agreement dated October 3, 1997, for Mr. Mercer to represent Mr. Tolley against Mr. Mercer’s client, Mr. Moore (Complainant’s Exhibit 1). Nor is it disputed that Mr. Moore’s insurer paid $25,000, the policy limits of Mr. Moore’s uninsured motorist coverage, that this amount was disbursed in Mr. Mercer’s office in November, 1997, and Mr. Mercer was paid $4,026.03 out of these proceeds (Complainant’s Exhibit 4).
Mr. Mercer states that later in the day on October 3, 1997, upon reflection, he determined that he had a conflict and sent a letter dated October 3, 1997, rescinding the contingent fee agreement signed earlier that day (Complainant’s Exhibit 2). However, Mr. Tolley testified that he did not receive the letter purporting to rescind the agreement. His testimony at trial questioned why he was paying Mr. Mercer a contingent fee if Mr. Mercer was not his attorney. On the face of Exhibit 1 appear the words "Rescinded 10/3/98," (emphasis added), below which is what appears to be Mr. Mercer’s signature. Therefore, on its face, Mr. Mercer’s contingent fee agreement indicates that it was not rescinded until a year after Mr. Mercer’s October 7, 1997 letter.
Mr. Mercer’s response to the Supreme Court Disciplinary Counsel concerning the Tolley matter was dated October 13, 1998 (Complainant’s Exhibit 13). In this response, Mr. Mercer told the Disciplinary Counsel that he had rescinded the contingent fee agreement, that he had referred Mr. Tolley to Mr. Canaday, and that whenever Mr. Tolley would call his office, he or his secretary, Ms. Tollerud would "redirect" Mr. Tolley to Mr. Strimbu or Mr. Canaday. Mr. Mercer said nothing in his response about the disbursement of the insurance proceeds in his office or the fact that he had been paid a portion of these proceeds. In the penultimate paragraph of his response, Mr. Mercer wrote, "I’ve now shared with you the extent of my knowledge of the matter." Plainly, that statement to the Disciplinary Counsel’s office was untrue.
The contingent fee agreement called for a fee equal to 35% of the total amount of the gross recovery. Mr. Mercer had a working relationship with an insurance adjuster, Jack Strimbu. Mr. Strimbu testified that his services were to be billed on an hourly basis. No statement from Mr. Strimbu itemizing his services on an hourly basis or his out of pocket expenses was ever offered or admitted into evidence. According to Mr. Canaday, he became involved in Mr. Tolley’s case at the request of Mr. Mercer. Mr. Mercer, according to Mr. Canaday, asked whether he would like to make some money. In return for a flat fee of $800, Mr. Canaday lent his letterhead, his trust account, and his name to the Tolley case. Mr. Strimbu authored letters on Mr. Canaday’s letterhead (Exhibits 5 and 9). Mr. Mercer, not Mr. Canaday, actually signed one of the letters on Mr. Canaday’s behalf (Complainant’s Exhibit 5). These letters to the insurance company for Mr. Moore established the basis for Mr. Tolley’s claim. At the time that he did this, Mr. Canaday was a newly minted lawyer who was struggling financially. He had sat unsuccessfully for the bar examination several times before finally passing. He had had little experience practicing law, and conducted any practice of law out of his house or Mr. Mercer’s office. He looked to Mr. Mercer, a law school classmate, for guidance in how to practice law and for access to clients. In short, Mr. Canaday depended upon Mr. Mercer for advice and benefit and did not exercise independent judgment as an attorney at the time the proposal to become involved in the Tolley case arose.
In due course, the insurance company, confronted with the evidence of Mr. Tolley’s extensive injuries, paid the policy limits of $25,000. The disbursement of these funds took place at Mr. Mercer’s office, not at Mr. Canaday’s. The checks were disbursed as follows:
$16,089.82 To Mr. Tolley. This represented exactly 65% of the settlement less $160.18 in costs. An itemization of these costs and the breakdown of the settlement proceeds was provided to Mr. Tolley on Mr. Canaday’s letterhead (Complainant’s Exhibit 3).
$ 8,750.00 The balance equaled 35% of the gross settlement proceeds. Of the $8,750.00 the fee was split in the following ways:
Jack Strimbu $4,084.15
Craig Mercer $4,026.03
Lawrence Canaday $ 800.00
There was no evidence as to whom the $160.18 in expenses was paid.
Mr. Canaday had no contingent fee agreement with Mr. Tolley. Mr. Tolley testified that he had never met Mr. Canaday until the closing. Mr. Tolley also testified that he did not understand that anybody except Mr. Mercer was his attorney.
Mr. Mercer testified that the money paid to him out of the Tolley settlement was for a debt that Mr. Canaday owed him for office supplies and other support provided to Mr. Canaday while he was learning the ropes of practicing law. No bill was ever prepared or presented to Mr. Canaday, and Mr. Canaday denied that he had incurred a formal debt to Mr. Mercer. The insistence by Mr. Mercer and Mr. Strimbu that Mr. Canaday was the attorney for Mr. Tolley earning a contingent fee is inconsistent with the $800 flat fee paid to Mr. Canaday out of the settlement. The payment and computation of the disbursement amounts, to the odd penny, to Mr. Mercer and to Mr. Strimbu, and the absence of any billing by either Mr. Strimbu or Mr. Mercer to Mr. Canaday to support their testimony, that the payment out of the settlement proceeds represented the discharge of hourly billings for services (in the case of Mr. Strimbu) and the payment of debt for accumulated office services (in the case of Mr. Mercer), indicates that Mr. Mercer and Mr. Strimbu continued to be the true beneficiaries of the contingent fee agreement with Mr. Tolley. Mr. Canaday’s nominal presence as counsel for Mr. Tolley and the use of his trust account was intended to create the appearance, but not the substance, of representation of Mr. Tolley by Mr. Canaday.
Mr. Canaday’s testimony was, in the opinion of this member of the Hearing Board, entitled to greater weight and credibility than Mr. Mercer. Mr. Canaday believed his testimony to be contrary to his own self interest in that he believed that he had participated in a fraud on the client and a fraud on the judicial system by lending his letterhead, his name and his trust account to Mr. Mercer and to Mr. Strimbu. In emotional testimony, he asked the Hearing Board not to take his license away. Mr. Canaday plainly regarded his license as a privilege for which he had sacrificed much and he saw himself as having risked his professional standing for a pittance in service of Mr. Mercer. When he testified, it was with the intention to make a clean breast of all of the events around the Tolley case, regardless of the personal consequences for him. By contrast, Mr. Mercer had a motive of self interest in his testimony.
Further, Mr. Canaday’s testimony revealed him to be naïve in not only the practice of law, but personal injury practice. Any pretense that he was actually representing Mr. Mercer as a knowledgeable attorney, or that he could have done so without Mr. Strimbu is inconsistent with Mr. Canaday’s limited experience and his own self assessment. Mr. Canaday was used as a puppet in this transaction. If his role was not concealed from Mr. Tolley until the date of the disbursement of the funds, Mr. Mercer attempted to do so in his interactions with the disciplinary prosecutor’s office.
Contrary to the acceptance by the majority of the Hearing Board of Mr. Mercer’s veracity, I believe that the foregoing facts compel the conclusion that Mr. Mercer undertook the representation of Mr. Tolley pursuant to a contingent fee agreement, that this representation was in conflict with Mr. Moore, that neither client was advised of this fact, that the agreement was not effectively rescinded, that Mr. Mercer prepared the rescission letter later and covered up the fact that he had, in fact, taken a contingent fee from Mr. Tolley’s recovery and shared it with Mr. Strimbu. I would find that the Complainant has proved their case by the requisite clear and convincing standard with respect to Counts II, III and IV of the amended complaint. I concur on the dismissal of Counts I and V for lack of proof.
III. ORDER OF DISMISSAL
No charge having been proven by clear and convincing evidence, it is therefore Ordered that all charges and counts in Case No. 00PDJ009 and Case No. 00PDJ037 are DISMISSED.
1. Neither party addressed the issue of whether an attorney can unilaterally rescind a fee agreement once executed. Accordingly, that issue is not addressed in this decision. This decision is based upon the assumption, not challenged by the People, that an attorney can unilaterally rescind a fee agreement in the face of an undisclosed conflict of interest.
2. To conclude otherwise would result in an automatic violation of Colo. RPC 1.7(a) and (b) anytime a conflict arose during an attorney/client relationship.
3. No evidence was presented from which the basis for the 35% disbursement can be determined. Concluding that Mercer rescinded the contingent fee agreement with Tolley also requires the conclusion that the contingent fee agreement cannot be the basis for the disbursement. Canaday, however, never prepared a written fee agreement with Tolley.
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