Case Title: In re Sinnott

Citation: 176 Vt. 596, 2004 VT 16, 845 A.2d 373

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 2004-02-12T00:00:00Z

Document:
In re Sinnott (2003-170); 176 Vt. 596; 845 A.2d 373

2004 VT 16

[Filed 12-Feb-2004]

               
                                 ENTRY ORDER

                                 2004 VT 16

                      SUPREME COURT DOCKET NO. 2003-170

                             NOVEMBER TERM, 2003

  In re Howard Sinnott, Esq.           }   APPEALED FROM:
                                       }
                                       }
                                       }   Vermont Professional 
                                       }   Responsibility Board
                                       }
                                       }   PRB FILE No. 2001.190
                                           Decision No. 43

                                           PRB Hearing Panel No. 2

             In the above-entitled cause, the Clerk will enter:

       ¶  1.  This Court reviews, sua sponte, the Professional
  Responsibility Board Hearing Panel's conclusion that respondent violated
  Vermont Rules of Professional Conduct 1.5 by charging an unreasonable fee,
  and its recommendations that respondent be publicly reprimanded and ordered
  to personally make restitution.  We affirm the panel's conclusion and
  accept its penalty recommendations.

       ¶  2.  Respondent is a licensed attorney in Vermont and New York. 
  At all times relevant to this complaint he was the sole member of the
  Bennington law firm Daly & Sinnott Law Centers, PLLC, also known as The Law
  Centers for Consumer Protection.  Respondent's practice consists almost
  exclusively of assisting clients reduce the amount of unsecured debt they
  owe to various creditors such as credit card companies.  Respondent's firm
  enrolls clients in its debt reduction program.  Under the program
  agreement, the firm makes automatic deductions from a client's bank
  account.  The client funds accumulate in either the "office fees account"
  or the "creditor reserve account" until they reach a level that makes debt
  settlement negotiation viable. 

       ¶  3.  New Jersey resident Juanita Gibbs turned to respondent's firm
  in November 2000 when she was facing collection of an $18,000 credit card
  debt owed to American Express.  She called respondent's firm and spoke with
  Milton Smith, a customer service employee who completed a client intake and
  discussed Gibbs's financial situation, including her American Express debt,
  monthly income and expenses. 

        
       ¶  4.  Shortly after Gibbs's phone conversation with Smith, she
  received a Legal Representation Agreement, a Notice of Representation, and
  a Credit Notification Letter.  The Legal Representation Agreement that
  Gibbs signed authorized the firm to negotiate her American Express debt. 
  It also authorized the firm to withdraw $300 per month from her bank
  account.  The agreement provided that for the first four months the sum of
  $284 would be allocated to the monthly office fee, zero would be allocated
  to the creditor reserve fund (for debt settlement), and $16 would be
  charged for a monthly account maintenance fee.  For the next thirteen
  months $142 would be allocated to the monthly office fee, $142 to the
  creditor reserve fund, and $16 to the monthly maintenance fee.  Thereafter,
  for the next nineteen months $284 would be allocated to the creditor
  reserve and $16 to account maintenance.

       ¶  5.  The agreement also contained the following clause which is
  central to this proceeding:

    I understand that the Law Center will necessarily incur
    administrative costs as a result of accepting me as a client,
    expenses as a result of negotiations with creditors, and it may
    incur costs for representing me in litigation, all of which would
    have been included in the 28% reduction of claims fees resulting
    from the completion of the Program.  I agree that if I do not
    complete, the Law Center will have earned from office fee payments
    $500 a month in administrative costs with a maximum of $1500 and
    $150/hr. in litigation costs, with a maximum of $1500 per case. 

       ¶  6.  The panel found that respondent's firm completed a number of
  "routine" and automated tasks in the course of representing Gibbs.  Most of
  these tasks consisted of mailing out form letters to Gibbs and her creditor
  and responding to Gibbs's occasional telephone inquiries as to the status
  of her case.  On February 20, 2001, Gibbs called the firm and was told that
  the firm was negotiating on her behalf.  On the next day, Gibbs received a
  summons from American Express related to her debt.  In early March, she
  informed the firm in writing that she was withdrawing from the program and
  was requesting an explanation of the $500 monthly administrative costs
  called for in the fee agreement.  The panel made no express finding as to
  the amount of hours that the firm spent on completing all of these tasks,
  but stated that it viewed respondent's estimate of between three and four
  hours of nonattorney time as "more than generous."
     
       ¶  7.  Five months after Gibbs's letter of withdrawal and request
  for refund, respondent replied with a letter of his own.  He stated:

         This letter accounts for your financial transactions with the
    Law Centers.  Pursuant to your written retainer agreement, you
    made monthly payments for debt settlement and attorney's fees of
    $284. 00 Before you discharged us as your attorneys, you in fact
    made four such payments, adding to a total of $1,136.00.  You also
    agreed to pay a $16.00 per month account maintenance fee.  You
    also explicitly agreed in the event of early discharge (i.e.
    before your debt could be settled) that you would be obligated to
    pay an administrative fee of $500.00 per month to be capped at a
    $1,500.00 total.  Since you remained in the program for four
    months, we properly imposed this fee of $1,500.00, although we
    will not seek remuneration from you above and beyond the $1,136
    paid by you to us. 
  
  The letter goes on to state that respondent would be glad to discuss the
  situation with Gibbs in an attempt to accommodate her concerns about the
  fee in light of her short tenure as a client.

       ¶  8.  When the four months worth of $16.00 monthly account
  maintenance fees are added to the other fees, respondent's firm had
  collected $1200 from Gibbs.  Respondent testified that his firm would have
  been justified in charging the full $1500 termination fee called for by the
  agreement.  Respondent also testified, and the panel found, that the "Fees
  Earned in Event of Termination" Clause contained in the Legal
  Representation Agreement that Gibbs signed was the only basis for the fee
  actually charged as well as respondent's claim of entitlement to the
  additional $300 which he could have, but chose not to charge Gibbs.

       ¶  9.  The panel heard testimony from respondent and his office
  manager that the firm does more work for those clients that have multiple
  creditors than it does for those clients like Gibbs, who sought help with
  only one of her debts.  Respondent testified that it was not unusual for a
  client to withdraw from the program before the client's debts were
  negotiated.  Nonetheless, the testimony and evidence indicated that
  respondent used the same fee agreement for almost all of his approximately
  7000 clients regardless of whether they were in the program for years or
  just for a few months.
       
       ¶  10.  Based on the foregoing findings, the panel concluded that
  respondent had violated Vermont Rules of Professional Conduct 1.5 by
  charging an unreasonable fee which it labeled as a "non-refundable
  retainer."  We review this case on our own motion pursuant to A.O. 9, Rule
  11(E).  On review, we will accept the panel's findings of fact unless a
  party demonstrates that these findings are clearly erroneous.  In re Blais,
  13 Vt. L. Wk. 376, 377,