99 A.3d 639
Del.2013Background
- Fred Barakat, admitted in Delaware (1992), listed a Wilmington address at 901 N. Market St. but primarily worked from home in Pennsylvania and used the Wilmington space sporadically as a shared, pay-for-use suite.
- ODC investigated compliance with Supreme Court Rule 12 (bona fide Delaware office) in 2005 and again in 2010–2012 after audits and a judicial referral. Barakat represented at one point he had staff and would be present several days per week.
- Audits (2007, 2011, and a forensic audit through 2011) found deficient and irregular books and records: failure to prepare reconciliations and client ledgers, depositing retainers into operating account or pocketing cash, commingling personal funds, and inability to prove cash receipts to deposits.
- ODC filed a 12-Count Petition (Oct. 2012) alleging violations of Rules 1.5(f), 1.15(a), 1.15(d), 3.4(c), 8.1(a), 8.4(c), and 8.4(d); Barakat contested the findings. A Board hearing occurred and the Board recommended a two-year suspension after finding all counts proven.
- The Delaware Supreme Court reviewed the record, sustained all counts except Count VI (insufficiently developed), adopted the Board’s factual findings for the other counts, and independently imposed a two-year suspension plus receiver appointment and other conditions.
Issues
| Issue | Plaintiff's Argument (ODC) | Defendant's Argument (Barakat) | Held |
|---|---|---|---|
| Bona fide office (Rule 12 / Rule 3.4(c)) | Barakat failed to maintain a bona fide Delaware office and misrepresented office staffing/presence. | Suite membership / phone accessibility and sporadic presence suffice; prior ODC letters estopped enforcement; Rule 12 unconstitutional residency/commerce claim. | Court: Substantial evidence supports violation; prior ODC letters did not preclude adjudication; constitutional challenge rejected. |
| False statements to ODC and Certificates of Compliance (Rules 8.1(a), 8.4(c), 8.4(d)) | Barakat knowingly made false/misleading statements about office presence, staff, and his 2008–2012 compliance certificates. | Statements were not knowingly false; some cross-exam testimony cited as exculpatory. | Court: Findings supported; certificate and ODC statement misrepresentations established. |
| Books & records / client funds handling (Rules 1.5(f), 1.15(a), 1.15(d)) | Audits show retainers improperly handled, commingling, no reconciliations/ledgers, risking client harm. | Audit evidence unreliable under Daubert; Comments to Rule 1.5 permit treating some small fees as earned; he complied with Comments. | Court: Auditors were qualified; Comments do not authorize Barakat’s practices; substantial evidence of violations (Counts VII–X). Count VI (specific Giles retainer) dismissed for inadequate record. |
| Sanction (appropriate discipline) | Two-year suspension recommended by Board based on pattern, dishonesty, multiple offenses, risk of client harm. | Two-year suspension excessive; analogies to Doughty argue for leniency. | Court: Two-year suspension affirmed; Doughty distinguishable (negligence vs. dishonest/pattern here). |
Key Cases Cited
- Tolchin v. Supreme Court of the State of N.J., 111 F.3d 1099 (3d Cir. 1997) (upheld state bona fide office requirement against Commerce Clause and related challenges)
- Daubert v. Merrell Dow Pharm., 509 U.S. 579 (1993) (standard for admissibility/reliability of expert testimony)
- In re Doughty, 832 A.2d 724 (Del. 2003) (discipline analysis where negligent, non-dishonest bookkeeping warranted lighter sanction)
- In re Benson, 774 A.2d 258 (Del. 2001) (careless record-keeping can create potential client harm warranting discipline)
- In re Abbott, 925 A.2d 482 (Del. 2007) (court discusses disciplinary authority and review of Board recommendations)
- In re Bailey, 821 A.2d 851 (Del. 2003) (reinstatement standards following discipline)