ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Eаrl Americus SMITH.
Misc. Docket AG No. 73, Sept. Term, 2013.
Court of Appeals of Maryland.
June 23, 2015.
116 A.3d 977
based on a conspiracy theory. Thus, Petitioners are entitled to judgment as a matter of law that they did not violate
Accordingly, we reverse the judgment of the Court of Special Appeals reversing the Circuit Court‘s grant of summary judgment for Windesheim and her Employer on Counts I-XI.
JUDGMENT OF THE COURT OF SPECIAL APPEALS REVERSED AS TO PETITIONERS. CASE REMANDED TO THAT COURT WITH INSTRUCTIONS TO AFFIRM THE JUDGMENT OF THE CIRCUIT COURT FOR HOWARD COUNTY AS TO PETITIONERS AND TO CONDUCT SUCH FURTHER PROCEEDINGS AS ARE NECESSARY AND NOT INCONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY RESPONDENTS.
Leonard Casalino, Esquire (Dunkirk, MD), for Respondent.
Argued before: BARBERA, C.J., HARRELL, BATTAGLIA, GREENE, MCDONALD, LAWRENCE F. RODOWSKY (Retired, Specially Assigned), DALE R. CATHELL (Retired, Specially Assigned), JJ.
MCDONALD, J.
Attorney discipline cases that result in disbarment often find the attorney committing one of the seven deadly sins—e.g., greed, lust, sloth. This is not one of those cases. The sin in this case was inattention—inattention to clients, inattention to an attorney trust account, and inattention to the activities of a non-lawyer assistant in whom the attorney misplaced his trust and who misused the attorney trust account to the detriment of the attorney‘s clients. Sadly, this too merits disbarment, as our regulation of the practice of law must protect the public not only from those attorneys who engage in deliberate, egregious acts of misconduct, but also those who fail to fulfill the routine duties of the profession that serve and safeguard their clients.
I
Background
A. Procedural Context
The Attorney Grievance Commission (“Commission“) charged Earl Ameriсus Smith, III with violating numerous provisions of the Maryland Lawyers’ Rules of Professional Conduct (“MLRPC“) arising out of the management of his attorney trust account, his delegation of tasks to his non-lawyer assistant, and his handling of several client matters.
Pursuant to
The Commission did not except to the hearing judge‘s findings and conclusions; it recommended that we disbar Mr. Smith. Mr. Smith conceded most of the violations, but filed an exception to the hearing judge‘s conclusion that he was responsible for violations of
B. Facts
The hearing judge‘s factual findings are uncontested; we therefore treat them as established.
Mr. Smith‘s Law Practice
Mr. Smith was admitted to the Maryland Bar in 1983. He is also a member of the District of Columbia Bar. During 1991, Mr. Smith established a law practice under the name of Bryan & Smith, P.C., which focused on personal injury matters. Since the mid-1990s, Mr. Smith has been the only attorney at the firm.1 The key facts relevant to the alleged violations concern Mr. Smith‘s delegation of responsibility to—and failure to supervise—his legal assistant, his mishandling of his attorney trust account related to personal injury cases, and his neglect of several client matters, all during the period 2009-2012.
Delegation of Responsibility to Dawn Staley-Jackson
During 1993, Mr. Smith hired Dawn Staley-Jackson2 as a paralegal. Ms. Staley-Jackson worked for the firm for the next two decades as a legal assistant. During the time period relevant to the alleged violations, her name appeared on the firm‘s stationery with the title “Legal Assistant.”
Mr. Smith delegated substantial authority to Ms. Staley-Jackson. Indeed, the hearing judge found that he “allowed Ms.
Mr. Smith gave Ms. Staley-Jackson responsibility for preparing settlement disbursement sheets, and for meeting with the client to explain the settlement sheet. Mr. Smith would not check the accuracy of the lists of disbursements with the client‘s file, other than to check the gross amount and his own fee. Mr. Smith also delegated to Ms. Staley-Jackson the responsibility to inform clients that settlement funds had been received.
After Ms. Staley-Jackson informed Mr. Smith that she was suffering from a serious illness, he permitted her to work from home, to take client files to her house, and to forward the office phone to her home and personal cell phone.
Operation of Personal Injury Trust Account
Mr. Smith maintained two attorney trust accounts at SunTrust Bank—one for attorney‘s fees and the other for receiving and disbursing funds in personal injury cases. The alleged violations concern the operation of the personal injury trust account. At all relevant times, Mr. Smith had sole check-signing authority for the personal injury trust account and used a computer software program to record deposits and disbursements and to issue checks payable from that account.
From January 2009 continuing through September 2012, Mr. Smith failed to create or maintain any meaningful records relating to the personal injury trust account. He did not keep accurate chronological listings of all deposits and disbursements, and failed to generate individual client matter records. Mr. Smith did not reconcile his trust account records on a monthly basis.
Mr. Smith ordinarily received monthly bank statements by mail. He testified that, sometime during 2010, the bank statements began to arrive by mail either sporadically or not at all. He said that he would go to the local branch to obtain a bank statement each month, but did not request copies of the negotiated checks. When Mr. Smith did receive a statement in the mail, it included photocopies of checks drawn on his trust account, but he did not regularly review these checks.
Ms. Staley-Jackson‘s Fraud
Beginning in at least 2009, Ms. Staley-Jackson regularly and systematically misappropriated funds from the firm‘s personal injury trust account by diverting checks drawn on that account payable to others or by fraudulently сreating and cashing checks made payable to herself. During the first seven months of 2009, Ms. Staley-Jackson took checks made payable to Jason Carle, a chiropractor who had rendered services to Mr. Smith‘s clients. Ms. Staley-Jackson would forge Mr. Carle‘s endorsement, sign the check herself, and cash the check. She cashed approximately 15 checks payable to Mr. Carle for more than $34,000 from January to July 2009. After July 2009, Ms. Staley-Jackson was apparently able to create and cash checks drawn on the trust account that listed herself as the payee.3 The parties stipulated
Deposit of Personal Funds into Attorney Trust Account
Ms. Staley-Jackson‘s diversion of funds from the personal injury trust account resulted in insufficient funds in that account to cover the purposes for which the funds had been deposited. When Mr. Smith realized in 2010 that the personal injury trust account was short of funds, he attempted to compensate for the shortfall with personal funds.
Mr. Smith deposited his own personal funds or placed borrowed funds into the trust account on five separate occasions from December 2010 through June 2012. On December
1, 2010, Mr. Smith cashed out his personal retirement account and deposited that money ($35,900) into the personal injury trust account. On February 10, 2011, Mr. Smith obtained a $10,000 loan from his father and deposited it into the trust account. On April 18, 2011, Mr. Smith deposited into the trust account another loan from his father in the amount of $50,000. On March 5, 2012, Mr. Smith deposited into the trust account another $25,000—this time a loan from his father-in-law. On June 21, 2012, Mr. Smith deposited $100,000 into the trust account, also obtained from his father-in-law.
The hearing judge found that these deposits belied any assertion that Mr. Smith was unaware of the serious deficiencies in the personal injury trust account—that it lacked sufficient funds to cover his existing fiduciary obligations to clients and third parties. In other words, Mr. Smith was aware for more than a year and a half that his personal injury trust account at SunTrust Bank was out of trust. However, as the hearing judge found, his “persistent failure over a period of almost four years to comply with the trust account record-keeping requirements” of the Maryland Rules meant that he was unable to detect the source of the shortfall and enabled Ms. Staley-Jackson “to get away with her theft scheme for as long as she did.”
Eventually the influx of personal funds failed to compensate for the misappropriations. In Seрtember 2012, SunTrust Bank reported to Bar Counsel an overdraft of Mr. Smith‘s trust account.
Late Payments to Medical Providers
In many of Mr. Smith‘s personal injury cases, the client and Mr. Smith signed an undertaking requested by a medical provider who had treated the client in which they agreed that Mr. Smith would pay fees owed to the provider directly from any settlement proceeds that he received on behalf of the client. During the time that Ms. Staley-Jackson was misappropriating funds from the trust account, these payments were made late, or sometimes not at all.
For example, in July 2010, Mr. Smith deposited a personal injury settlement check in the amount of $4,000 for the benefit of his client Teonka Young. On August 5, 2010, Ms. Young signed a settlement disbursement sheet that listed a disbursement of $625 to New Carrollton Therapy, a medical provider that had treated Ms. Young. Ms. Young received her portion of the settlement. However, a
On March 31, 2011, Mr. Smith deposited a settlement check for the benefit of his client Robert Mayo in the amount of $7,300. On May 26, 2011, Robert Mayo signed a settlement disbursement sheet that listed disbursements of $1,216.50 to Chris Brannigan, an attorney, and $2,500 to Alpha Health Center-Oxon Hill. A check for Mr. Mayo‘s portion of the settlement was issued on May 25, 2011. However, the checks payable to Mr. Brannigan and Alpha Health Center-Oxon Hill were not issued until 10 months later, on March 9, 2012.
On March 31, 2011, Mr. Smith deposited a personal injury settlement check in the amount of $15,500 for the benefit of client Robin Mayo. In September 2011, Mr. Smith provided Robin Mayo with a settlement disbursement sheet that listed a disbursement of $5,305 to Alpha Health Center. Ms. Mayo received her portion of the settlement on September 23, 2011. A check payable to Alpha Health Center for the benefit of Robin Mayo was not issued until April 3, 2012.
Mr. Smith testified that he would not have sent out these payments in March and April 2012 without first checking his computer program‘s accounts to ensure he had not already paid these medical providers. However, Mr. Smith did not check the client files, which were then located in Ms. Staley-Jackson‘s house, or examine his bank statements. Instead, he talked with Mr. Staley-Jackson regarding the discrepancy and relied on her information.
Beginning in the late summer of 2011, James Bolger, a collection agent for several chiropractor facilities, began to call Mr. Smith to alert him about unpaid bills owed to those facilities by Mr. Smith‘s clients. When Mr. Smith was unresponsive, Mr. Bolger filed several complaints with the Commission regarding his inability tо obtain payment from Mr. Smith on the unpaid medical bills. After Mr. Bolger filed complaints with the Commission, Mr. Smith issued ten checks in March and April 2012 to various medical providers represented by Mr. Bolger. Mr. Smith was aware that his trust account did not contain the necessary funds to pay the amounts due and obtained the $25,000 loan from his father-in-law in March 2012 to help cover the deficit.
Discovery of the Fraud
Following notice in September 2012 from SunTrust Bank that he had an overdraft on his trust account, Mr. Smith discovered that the bounced checks had been payable to Ms. Staley-Jackson. Mr. Smith then retrieved his client files from Ms. Staley-Jackson‘s home on October 4, 2012, and shortly thereafter fired Ms. Staley-Jackson.4
Unauthorized settlements and diversion of proceeds
Several complaints received by the Commission concerning Mr. Smith revealed a pattern of delegation to Ms. Staley-Jackson, settlement of claims by her without the client‘s knowledge, and the diversion of the settlement proceeds.
—Orin H. Thomas, Jr.
Mr. Smith represented Orin H. Thomas, Jr. on a contingent fee basis with regard to a personal injury claim arising out of a
amended to name Metropolitan Group Property & Casualty Insurance Company (“Metropolitan“) with respect to underinsured motorist benefits.
Following a settlement with Allstate for the policy limits, a check in the amount of $50,000 issued by Allstate and payable to “Earl Smith, Esquire & his client, Orin Thomas” was deposited into Mr. Smith‘s attorney trust account on October 13, 2009. On November 12, 2009, Mr. Smith issued a check drawn on his trust account and payable to Bryan & Smith, P.C. representing a partial attorney‘s fee payment. Mr. Smith did not inform Mr. Thomas that this fee disbursement was made and did not provide Mr. Thomas with a written settlement disbursement statement. Mr. Smith testified that he wrote checks to medical providers and lien holders on Mr. Thomas’ behalf; but these checks were somehow converted into checks payable to Ms. Staley-Jackson.
On January 28, 2010, Mr. Smith filed a stipulation of voluntary dismissal as to Ms. Lee following the settlement with Allstate.5 In October 2010, more than a year after depositing the settlement check from Allstate, Mr. Smith first issued a check from the settlement proceeds to Mr. Thomas for $3,000. From October 2010 to June 2012, Mr. Thomas received six checks from Mr. Smith, totaling $13,200. Mr. Thomas received no other disbursements from the settlement proceeds of $50,000. Mr. Smith testified that he did not distribute the remaining proceeds from the Allstate settlement because he expected there to be additional liens. Mr. Smith did not respond to Mr. Thomas’ repeated requests for an accounting and for information regarding the case.
After the settlement with Allstate, the claim against Mr. Thomas’ own insurance company, Metropolitan, remained pending in the circuit court. On February 24, 2011, Metropolitan filed a motion to compel discovery based on Mr. Smith‘s
failure to respond to discovery requests. Mr. Smith neither responded to the motion nor filed any discovery responses.
Mr. Thomas’ case was scheduled for a pretrial conference on May 3, 2011. Mr. Smith did not appear for the pretrial conference and the court dismissed Mr. Thomas’ case with prejudice. Mr. Smith testified that he did not appear for the pretrial conference because he never received the scheduling order or the discovery requests, and because he did not know that Metropolitan had been served. Instead, he thought negotiations (as conducted by Ms. Staley-Jackson) were ongoing. Mr. Smith knew of the dismissal of Mr. Thomas’ claim against Metropolitan, but did not inform Mr. Thomas that his case had been dismissed.
—Terry Hardy and the Hardy children
Mr. Smith represented Terry Hardy and his two minor children, Terry Hardy Jr. and Deja Hardy, in а personal injury matter following a motor vehicle accident that occurred on August 26, 2009. The representation was on a contingent fee basis.
Without Mr. Hardy‘s knowledge or consent, Ms. Staley-Jackson negotiated a settlement for Mr. Hardy and his daughter,
Neither Mr. Hardy nor his children received any of the settlement proceeds. Mr. Smith did not create or provide settlement disbursement sheets to Mr. Hardy and he did not create client matter records for the funds deposited in trust. Mr. Smith was not responsive to Mr. Hardy‘s telephone calls and requests for information.
—Sharon Hardy
Mr. Smith also represented Sharon Hardy, Terry Hardy‘s wife, in connection with a personal injury claim following a separate motor vehicle accident that occurred on September 1, 2009. Without Mrs. Hardy‘s knowledge or consent, Ms. Staley-Jackson negotiated a settlement of her claim. On May 25, 2011, a check from Progressive Insurance Company payable to Mrs. Hardy and Bryan & Smith, P.C. in the amount of $6,007 was deposited into Mr. Smith‘s trust account.
Mrs. Hardy never received any of the settlement proceeds. Mr. Smith did not generate or provide a settlement disbursement sheet to Mrs. Hardy, and did not create a client matter record for her funds deposited in trust. Mr. Smith was not responsive to Mrs. Hardy‘s telephone calls and voicemails.
—Sheila Matthews
Mr. Smith represented Sheila Matthews regarding a personal injury claim on a contingent fee basis following a motor vehicle accident that occurred on February 16, 2011. On December 8, 2011, Mr. Smith filed a civil complaint on behalf of Ms. Matthews in the District Court of Maryland, sitting in Prince George‘s County. The complaint named two defendants, Oscar Tyler, who was insured by Bankers Independent Insurance, and Tiffany Johnson, who was insured by ELCO Administrative Services.
Without Ms. Matthews’ consent or knowledge, Ms. Staley-Jackson presented written settlement demаnds and eventually negotiated a settlement with ELCO Administrative Services for $1,600 in exchange for a release. On June 17, 2012, Ms. Staley-Jackson forged Ms. Matthews’ signature on the release. On August 17, 2012, the settlement check in the amount of $1,600 payable to Sheila Matthews and Bryan & Smith, P.C. was deposited into Mr. Smith‘s personal injury trust account. Ms. Matthews never received the settlement proceeds from the ELCO settlement. Mr. Smith did not provide a written settlement statement or other accounting of settlement funds.
After ELCO settled, the claim against the second defendant, Oscar Tyler and Bankers Independent Insurance, remained pending in the District Court and was scheduled for trial on September 26, 2012. Ms. Matthews received notice from Mr. Smith‘s office that her case had been set for trial, but she had no further contact with Mr. Smith prior to the trial date. Mr. Smith testified that he was aware of the trial date but that he had been told by
II
Discussion
The hearing judge concluded that Mr. Smith committed all of the violations alleged by the Commission, except for the allegation relating to
Mr. Smith‘s misconduct may be considered in three categories: (1) his failure to supervise Ms. Staley-Jackson; (2) his failure to comply with rules concerning his representation of his clients and the management of his personal injury attorney trust account; and (3) misconduct of Ms. Staley-Jackson for which Mr. Smith is responsible.
A. Failure to Supervise Non-Lawyer Assistant
At the heart of most of the alleged violations in this case is the unsupervised delegation of many of Mr. Smith‘s responsibilities to his legal assistant. That unsupervised delegation is intertwined with violations directly committed by Mr. Smith as well as the misconduct of his legal assistant for which he bears responsibility. Unsupervised delegation is also itself а violation of the MLRPC.
MLRPC 5.3(a) and (b)—Supervision of Non-Lawyer Employees
Mr. Smith violated
MLRPC 5.5(a)—Unauthorized Practice of Law
When an attorney fails to make the “reasonable efforts” required by
The hearing judge found that in carrying out various activities without supervision, Ms. Staley-Jackson engaged in the practice of law, a finding clearly supported in the record. Mr. Smith regularly delegated to Ms. Staley-Jackson the authority to send demand letters to insurance companies, negotiate settlements, communicate with and advise clients, communicate with medical providers, and draft and sign pleadings and other filings for the court, all with little or no supervision. Accordingly, Mr. Smith violated
B. Misconduct in Relation to Clients and Trust Account
MLRPC 1.1—Competence
Mr. Smith failed to properly oversee his personal injury trust account and, as a result, failed to maintain the settlement monies in the account, resulting in negative balances as to individual clients and a negative balance overall as of September 2012. This was a violation of
Mr. Smith also failed to act competently in his handling of the cases of Ms. Matthews, the Hardys, and Mr. Thomas. He failed to consult with Ms. Matthews regarding settlement of her case, to inform her that a settlement check had been received, and to appear in court on her behalf, resulting in the dismissal of the remainder of her case. Similarly, Mr. Smith failed to pursue litigation against Mr. Thomas’ insurance company following the settlement with Allstate, failed to re-spond to discovery requests and a motion to compel discovery, and failed to appear for a pretrial conference, resulting in the dismissal of part of Mr. Thomas’ case. Mr. Smith failed to consult with the Hardys regarding the settlements, to inform them once settlement checks were received, and to respond to their requests for information. Such conduct violated
MLRPC 1.2(a)—Scope of Representation
MLRPC 1.3—Diligence
Incompetence often goes hand in hаnd with a lack of diligence—a failure to act with reasonable diligence will often result in incompetent representation. For example, the failure to pursue a claim after filing a complaint demonstrates not only incompetence, but also insufficient diligence. Attorney Grievance Comm‘n v. Gray, 436 Md. 513, 520, 83 A.3d 786 (2014). Failure to keep a client informed about the client‘s case, to promptly disburse settlement funds, or to respond to reasonable requests for information also violates
Mr. Smith violated
MLRPC 1.4—Communication
(a) A lawyer shall:
(1) promptly inform the client of any decision or circumstance with respect to which the client‘s informed consent is required by these Rules;
(2) keep the client reasonably informed about the status of the matter;
(3) promptly comply with reasonable requests for information....
(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.
A lawyer who receives a settlement offer from opposing counsel “must promptly inform the client of its substance” unless the client has indicated the proposal would be unacceptable or has previously authorized the attorney to act.
Mr. Smith violated
MLRPC 1.5(c)—Contingent Fee Disbursement Statements
MLRPC 1.15(a) and (b)—safekeeping of trust funds
Maryland Rule 16-606.1—trust account records
Maryland Rule 16-607—commingling funds
Mr. Smith violated
MLRPC 1.15(d)—notice of receipt of funds and prompt disbursement
Mr. Smith violated
Mr. Smith also failed to promptly disburse funds to medical providers that were entitled to portions of the client‘s settlement proceeds. Payments to Alpha Health Center and New Carrollton Therapy were delayed for more than a year after Mr. Smith received the settlement proceeds for the cases involving Robert Mayo and Robin Mayo. See Mungin, 439 Md. at 308-09, 96 A.3d 122 (attorney violated
MLRPC 1.15(e)—prompt disbursement of funds not in dispute
Maryland Rule 16-609—Trust Account
Mr. Smith received settlement proceeds for the benefit of Mr. Thomas and deposited the monies into his attorney trust account. Mr. Smith then disbursed funds for his legal fees without obtaining his client‘s permission to do so. This was an unauthorized use of funds from his attorney trust account, regardless of Mr. Smith‘s intent, in violation of
MLRPC 8.4(c)—conduct involving dishonesty, fraud, deceit or misrepresentation
Mr. Smith violated
MLRPC 8.4(d)—conduct prejudicial to the administration of justice
“It is professional misconduct for a lawyer to ... engage in conduct that is prejudicial to the administration of justice[.]”
Mr. Smith violated
Mr. Smith‘s virtual abandonment of his practice to the charge of his non-lawyer assistant, with little or no supervision, to such an extent that she engaged in the unauthorized practice of law and was able to misappropriate client monies for almost four years constitutes conduct prejudicial to the administration of justice. Mr. Smith agreed to represent clients but failed to keep himself apprised as to the status of his clients’ cases and failed to communicate with clients, even when it was necessary to obtain the clients’ informed consent. Moreover, Mr. Smith failed to appear in court on behalf of Ms. Matthews, resulting in her having to attend the hearing without counsel and in a false statement being made to the court. See Davy, 435 Md. at 707, 80 A.3d 322 (failure to provide competent and diligent representation, such as not communicating with clients and not appearing in court, constitute conduct prejudicial to the administration of justice). He failed to respond to discovery requests on behalf of Mr. Thomas, resulting in the dismissal of part of that case. See Thomas, 440 Md. at 556, 103 A.3d 629 (“A failure by an attorney to appear in court at a hearing on behalf of his or her client constitutes conduct prejudicial to the administration of justice[.]“). Mr. Smith‘s conduct caused significant harm to his clients both financially and in their ability to prosecute their
MLRPC 8.4(a)—violations of the MLRPC
C. Responsibility for Misconduct of Non-Lawyer Employee
On occasion, a non-lawyer employee of a lawyer may do something that the lawyer is prohibited from doing under the
First, the lawyer is responsible for the non-lawyer‘s actions “if the lawyer orders or, with the knowledge of the specific conduct, ratifies the conduct involved.”
Second, even if the lawyer does not order or ratify the misconduct, if the lawyer is a partner in a firm or has direct supervisory authority over the employee, and “knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action,” the lawyer is responsible for the misconduct.
The hearing judge concluded that Mr. Smith was responsible for Ms. Staley-Jackson‘s misconduct pursuant to
Under
Mr. Smith‘s Knowledge
As the hearing judge found, Mr. Smith had to know that there were serious deficiencies in his trust account by at least December 1, 2010, when he cashed out his personal retirement account and deposited $35,900 into the trust account to prevent the account from falling further out of trust. This knowledge was repeatedly confirmed as Mr. Smith found it necessary to deposit substantial personal funds into his trust account on four other occasions over the next 18 months.9 Thus, Mr. Smith was not ignorant of the fact that his trust account was being violated. See Glenn, 341 Md. at 466, 671 A.2d 463 (accepting the hearing judge‘s finding that, although the attorney did not have specific knowledge of his employees’ misconduct, he could not have been ignorant to the jeopardy facing his trust account because the attorney had exclusive check writing authority and the potential for a shortfall was apparent).
Second, as of March 2012, when Mr. Smith received complaints from Mr. Bolger regarding unpaid client bills, Mr. Smith also had to know that, despite the receipt of settlement proceeds by his office, various medical providers and third parties were not receiving payments promised from those proceeds. Mr. Smith also knew that he had presented settlement disbursement sheets to certain clients listing paymеnts to medical providers that Mr. Smith now knew had not been made. For example, on August 6, 2010, Mr. Smith presented to his client Teonka Young a settlement sheet listing a disbursement of $625 to New Carrollton Therapy. As a result of Mr. Bolger‘s communications with Mr. Smith and Mr. Bolger‘s complaints to the Commission, Mr. Smith paid $625 to New Carrollton Therapy in April 17, 2012. He testified that he would not have made this payment without checking his computer program to make sure the payment had not been made previously. Similarly, the settlement disbursement sheets presented to Robert and Robin Mayo in May and September 2011 listed payments to medical providers that Mr. Smith knew, as of April 2012, had not been made. Nor could the discrepancies with respect to these clients be disregarded as isolated occurrences, as Mr. Bolger complained of non-payment for multiple clients treated in multiple medical facilities. Thus, as of
Thus, Mr. Smith had knowledge that his client trust fund was continually being invaded and that payments were not reaching their intended recipients, contrary to the representations made on settlement sheets presented to clients. However, there was no specific factual finding by the hearing judge that Mr. Smith knew Ms. Staley-Jackson was re-creating checks drawn on the trust account and making them payable to herself or that she was creating false settlement disbursement sheets.10
Mr. Smith‘s ignorance of the details of the invasion of his trust account and the diversion of funds did not absolve him from the obligation to take reasonable remedial measures with respect to his trust fund for several reasons. First, Ms. Staley-Jackson was Mr. Smith‘s only employee. Second, this is not a case where the fraud was well concealed; rather a review of the account statements and negotiated checks would have revealed multiple checks over a four-year period payable from the trust account to Ms. Staley-Jackson. For example, during December 2010, Ms. Staley-Jackson cashed six checks payable to herself drawn on the trust account, for a total of $20,010, almost completely offsetting Mr. Smith‘s deposit of personal funds made that same month. Third, the fraud would also have been detected had Mr. Smith been in contact with his clients, as any communication wаs likely to reveal that the clients had not received portions of the settlements to which they were entitled. Mr. Smith cannot avoid responsibility for the misconduct of his employee under
Mr. Smith had sufficient knowledge of misconduct relating to the operating of his trust account that his obligation to take reasonable remedial measures under
Reasonable remedial measures
Despite Mr. Smith‘s knowledge that client funds in the trust account were being invaded as of December 2010, he failed to take any reasonable efforts to investigate why the trust account did not contain sufficient funds to cover his obligations and instead deposited personal funds into his trust account for more than a year. The failure to examine his client‘s files, check bank statements and negotiated checks, or otherwise attempt to investigate the deficiencies in his trust account amounts to a failure to take reasonable remedial measures. Moreover, despite knowledge that
Had Mr. Smith taken reasonable remedial measures in March and April 2012 to investigate why medical providers were not paid, he likely would have noticed the numerous checks payable to Ms. Staley-Jackson and would have been able to mitigate or prevent the misappropriation of $100,000 from the trust account by Ms. Staley-Jackson between April and September 2012.
Summary
Mr. Smith knew of the invasion of his trust account beginning in 2009 and would surely have learned the details of Ms. Staley-Jackson‘s misconduct had he taken reasonable remedial measures at that time, and might well have prevented most of the misappropriation of funds and other violations. But he failed to do so. Had Ms. Staley-Jackson been an attorney, her conduct would have violated multiple provisions of the
Mr. Smith‘s Exception
Mr. Smith argues that he should not be held responsible for Ms. Staley-Jackson‘s intentional misappropriation of funds, false statements, or fraud that, if committed by an attorney, would amount to violations of
Even assuming Mr. Smith is correct that an attorney can never violate
Mr. Smith also argues that, because Ms. Staley-Jackson‘s conduct was criminal and because he could not have foreseen such intentional wrongdoing, he should not be held responsible for it. This Court has not adopted such a distinction. See Johnson, 409 Md. at 507, 976 A.2d 245 (imputing a violation of
III
Sanction
As in many attorney discipline cases, at this stage of the proceeding, the essential facts are no longer a matter of dispute and the legal determinations are either obvious or fine points with relatively little effect on the ultimate outcome. Our primary function is to fashion a sanction appropriate to the facts and the violations. As always, our purpose is “not to punish the errant lawyer but rather to protect the public, to maintain the integrity of the legal profession and to deter other lawyers from engaging in violations of the Rules of Professional Conduct.” Attorney Grievance Comm‘n v. Webster, 348 Md. 662, 678, 705 A.2d 1135 (1998).
Bar Counsel argues for disbarment. Mr. Smith counters that his misconduct, although negligent, was not intentional and that the appropriate sanction is a suspension that allows for reinstatement “after a reasonable period of time.”12
In determining the appropriate sanction, this Court considers the answers to four questions derived from the American Bar Association‘s Standards for Imposing Lawyer Sanctions: (1) What ethical duty was violated? (2) What was the lawyer‘s mental state? (3) What was the extent of the actual or potential injury caused by the misconduct? and (4)
Are any aggravating or mitigating factors present?13 See Attorney Grievance Comm‘n v. Taylor, 405 Md. 697, 720, 955 A.2d 755 (2008).
Nature of ethical duties violated
Mr. Smith failed to comply with the rules governing attorney trust accounts with the result that he failed to carry out his fiduciary obligation to his clients and his promises to third parties to maintain funds in trust and to disburse funds promptly. Mr. Smith also failed his clients in delegating large parts of his practice to his lay assistant without supervision, failing to communicate with his clients, and failing to stay abreast of his cases. The apparent abandonment of his practice to his assistant compromised his ability to fulfill the ethical duties that govern the practice of law. These are serious lapses.
State of mind
The hearing judge did not find that Mr. Smith acted with malicious intent, and the record does not suggest that he did. But the hearing judge did find that Mr. Smith had reason to know his trust account was being invaded. Moreover, Mr. Smith‘s blanket delegation of authority to Ms. Staley-Jackson to communicate with clients, negotiate settlements, sign pleadings and other court papers, obtain client consent for settlements, and transmit and cash checks without adequate supervision relinquished his role and obligations under the disciplinary rules and was, at best, gross
Extent of injury to clients and others
Mr. Smith‘s misconduct resulted in foregone claims, monetary injury to his clients, and delayed payments to third parties. A court dismissed with prejudice claims brought on behalf of Ms. Matthews and Mr. Thomas. Ms. Matthews, Mr. and Mrs. Hardy and the Hardys’ daughter had their cases settled without their knowledge. The Hardys and Ms. Matthews never received proceeds from settlements to which they were entitled. Mr. Thomas intermittently received only a portion of the settlement in his case. Multiple medical providers were not paid fees to which they were entitled for months after Mr. Smith had received settlement proceeds out of which he and his clients had agreed payment would be made. Ironically, on the record before us, it appears that Mr. Smith and his family members may have incurred the greatest monetary loss as a result of his misguided efforts to shore up his trust account with personal funds.
Aggravating and mitigating factors
Mr. Smith‘s neglect as to his trust account and his clients cоnstitutes a “pattern of misconduct” that is an aggravating factor. See Kremer, 432 Md. at 340, 68 A.3d 862. The fact that Mr. Smith is an experienced attorney with more than 30 years in the practice of law also counts against him as an aggravating factor. See Attorney Grievance Comm‘n v. Fader, 431 Md. 395, 435-37, 66 A.3d 18 (2013).
As the hearing judge found, there are mitigating factors present. This was the first disciplinary proceeding initiated against Mr. Smith. Mr. Smith cooperated with Bar Counsel and took responsibility for his failure to manage his trust account and to supervise Ms. Staley-Jackson. He also admitted to most of the violations charged by the Commission. The hearing judge found that Mr. Smith did not receive any personal benefit from Ms. Staley-Jackson‘s fraud and that he had no knowledge of criminal activity. It also appears to be undisputed that Mr. Smith is very active in his community as a leader in youth activities and as a volunteer in a local band that gives charitable performances.
We also note that Mr. Smith made an effort to rectify some of the consequences of Ms. Staley-Jackson‘s misappropriations and his own misconduct by trying to make the trust account whole out of his own pocket. This factor cuts both ways, however. Restitution of a loss caused by misconduct is what we would want of anyone in his place—and too few dо.15 But the
Mr. Smith‘s conduct evidences an inexcusable pattern of neglect with respect to the representation of several clients and the management of his trust account. It is this pattern of neglect towards the interests of his clients, the failure to conduct a reasonable investigation into his accounts and client files once he had notice of misconduct, and the significant harm to clients that warrants disbarment in this case. This Court has disbarred attorneys in prior cases involving a pattern of neglect of clients, even when there were no prior disciplinary actions against the attorney. See, e.g., Attorney Grievance Comm‘n v. Wallace, 368 Md. 277, 293, 793 A.2d 535 (2002); see also Attorney Grievance Comm‘n v. Dominguez, 427 Md. 308, 327, 47 A.3d 975 (2012); Attorney Grievance Comm‘n v. Lara, 418 Md. 355, 365, 14 A.3d 650 (2011); Attorney Grievance Comm‘n v. Faber, 373 Md. 173, 183, 817 A.2d 205 (2003). Moreover, under
IT IS SO ORDERED; RESPONDENT SHALL PAY ALL COSTS AS TAXED BY THE CLERK OF THE COURT, INCLUDING COSTS OF ALL TRANSCRIPTS, PURSUANT TO