Case Title: Attorney Grievance v. Nichols

Citation: 405 Md. 207

Docket Number: 25ag/07

State: maryland

Court: Maryland Supreme Court

Date: 2008-06-17T00:00:00Z

Document:
Attorney Grievance Commission of Maryland v. Ernest S. Nichols
AG No. 25, September Term, 2007
HEADNOTE:  Indefinite suspension is the appropriate sanction for a respondent who did
not seek proper authorization of the Bankruptcy Court before taking his fee from a financial
settlement, which was property of his client’s bankruptcy estate.
In the Circuit Court for Baltimore County
Case No. C-07-009722
IN THE COURT OF APPEALS
OF MARYLAND
Misc. Docket AG No. 25
September Term, 2007
ATTORNEY GRIEVANCE COMMISSION
OF MARYLAND
v.
ERNEST S. NICHOLS
Bell, C.J.
Harrell
Battaglia
Greene
Murphy
Raker, Irma S. (Retired, Specially
Assigned)
Cathell, Dale R. (Retired, Specially
Assigned)
JJ.
Opinion by Greene, J.
Raker, J., Dissents.
Filed: June 17, 2008
1 Maryland Rule 16-751 (a) provides in pertinent part:
(a) Commencement of disciplinary or remedial action.  (1) Upon
approval of [the Attorney Grievance] Commission.  Upon approval or
direction of the [the Attorney Grievance] Commission, Bar Counsel
shall file a Petition for Disciplinary or Remedial Action in the Court
of Appeals. 
2  MRPC 1.1 provides:
A lawyer shall provide competent representation to a client.
Competent representation requires the legal knowledge, skill,
thoroughness and preparation reasonably necessary for the
representation.
3  MRPC 1.3 provides:
A lawyer shall act with reasonable diligence and promptness in
representing a client.
4 MRPC 1.5 (a) provides:
A lawyer shall not make an agreement for, charge, or collect an
unreasonable fee or an unreasonable amount for expenses.  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; 
(continued...)
The Attorney Grievance Commission of Maryland (“Petitioner”), acting through Bar
Counsel and pursuant to Maryland Rule 16-751 (a), 1 filed a Petition For Disciplinary or
Remedial Action against Respondent, Ernest S. Nichols on August 14, 2007.  The Petition
alleged that Respondent, who was admitted to the Bar of this Court on December 13, 1995,
violated Rules 1.1 (Competence),2 1.3 (Diligence),3 1.5 (Fees),4 1.15 (Safekeeping Property),5
(...continued)
(2) the likelihood, if apparent to the client, that the acceptance of the
particular employment will preclude other employment of 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.
5 MRPC 1.15 provides in relevant part:
(a) A lawyer shall hold property of clients or third persons that is in
a lawyer's possession in connection with a representation separate
from the lawyer's own property.  Funds shall be kept in a separate
account maintained pursuant to Title 16, Chapter 600 of the Maryland
Rules. Other property shall be identified as such and appropriately
safeguarded.  Complete records of such account funds and of other
property shall be kept by the lawyer and shall be preserved for a
period of five years after termination of the representation.
(b) A lawyer must deposit the lawyer’s own funds in a client trust
account for the sole purpose of paying bank service charges on that
account, but only in an amount necessary for that purpose. 
(c) Unless the client gives informed consent, confirmed in writing, to
a different arrangement, a lawyer shall deposit into a client trust
account legal fees and expenses that have been paid in advance, to be
withdrawn by the lawyer only as fees are earned or expenses incurred.
(d) Upon receiving funds or other property in which a client or third
person has an interest, a lawyer shall promptly notify the client or
third person.  Except as stated in this Rule or otherwise permitted by
law or by agreement with the client, a lawyer shall promptly deliver
to the client or third person any funds or other property that the client
or third person is entitled to receive and, upon request by the client or
third person, shall promptly render a full accounting regarding such
property.
(e) When in the course of representation a lawyer is in possession of
(continued...)
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(...continued)
property in which two or more persons (one of whom may be the
lawyer) claim interests, the property shall be kept separate by the
lawyer until the dispute is resolved. The lawyer shall promptly
distribute all portions of the property as to which the interests are not
in dispute.
6 MRPC 1.16 (d) provides
Upon termination of representation, a lawyer shall take steps
to the extent reasonably practicable to protect a client’s interests, such
as giving reasonable notice to the client, allowing time for
employment of other counsel, surrendering papers and property to
which the client is entitled and refunding any advance payment of fee
or expense that has not been earned or incurred.  The lawyer may
retain papers relating to the client to the extent permitted by other law.
7 MRPC 8.1 provides in relevant part:
An applicant for admission or reinstatement to the bar, or a lawyer in
connection with a bar admission application or in connection with a
disciplinary matter, shall not: 
* * *
(b) fail to disclose a fact necessary to correct a misapprehension
known by the person to have arisen in the matter, or  knowingly fail
to respond to a lawful demand for information from an admissions or
disciplinary authority, except that this Rule does not require disclosure
of information otherwise protected by Rule 1.6.
8 MRPC 8.4, in relevant part, provides:
It is professional misconduct for a lawyer to:
* * *
(c) engage in conduct involving dishonesty, fraud, deceit or
misrepresentation[.]
-3-
1.16 (d) (Declining or Terminating Representation),6 Rule 8.1 (b) (Bar Admission and
Disciplinary Matters),7 and 8.4 (c) (M isconduct)8 of the Maryland Rules of Professional
9 Maryland Rule 16-752 (a) states:
(a) Order.  Upon the filing of a Petition for Disciplinary or Remedial
Action, the Court of Appeals may enter an order designating a judge
of any circuit court to hear the action and the clerk responsible for
maintaining the record.  The order of designation shall require the
judge, after consultation with Bar Counsel and the attorney, to enter
a scheduling order defining the extent of discovery and setting dates
for the completion of discovery, filing of motions, and hearing.
10 Maryland Rule 16-757 (c) states in pertinent part:
(c) Findings and conclusions.  The judge shall prepare and file or
dictate into the record a statement of the judge’s findings of fact,
including findings as to any evidence regarding remedial action, and
conclusions of law.
11 Maryland Rule 16-754, entitled “Answer,” states:
(a) Timing; contents.  Within 15 days after being served with the
petition, unless a different time is ordered, the respondent shall file
with the designated clerk an answer to the petition and serve a copy
on the petitioner.  Sections (c) and (e) of Rule 2-323 apply to the
answer.  Defenses and objections to the petition, including
insufficiency of service, shall be stated in the answer and not by
preliminary motion.
(b) Procedural defects.  It is not a defense or ground for objection to
(continued...)
-4-
Conduct (“MRPC”) during his representation of Charles Caralle in connection with a
personal injury claim and in Chapter 7 bankruptcy proceedings.  Pursuant to Maryland Rules
16-752 (a)9 and 16-757 (c), 10 we referred the matter to the Honorable Lawrence R. Daniels
of the Circuit Court for Baltimore County to conduct an evidentiary hearing and to submit
to this Court proposed findings of fact and conclusions of law.  Respondent did not answer
the Petition, as required by Maryland Rule 16-754,11 and, therefore, an Order of Default was
11(...continued)
a petition that procedural defects may have occurred during
disciplinary or remedial proceedings prior to the filing of the petition.
(c) Failure to answer.  If the time for filing an answer has expired
and the respondent has failed to file an answer in accordance with
section (a) of this Rule, the court shall treat the failure as a default and
the provisions of Rule 2-613 shall apply.
12  Maryland Rule 2-613(b) provides:
(b) Order of default.  If the time for pleading has expired and a
defendant has failed to plead as provided by these rules, the court, on
written request of the plaintiff, shall enter an order of default.  The
request shall state the last known address of the defendant.
13 Maryland Rule 2-613(c) provides:
(c) Notice.  Promptly upon entry of an order of default, the clerk shall
issue a notice informing the defendant that the order of default has
been entered and that the defendant may move to vacate the order
within 30 days after its entry.  The notice shall be mailed to the
defendant at the address stated in the request and to the defendant's
attorney of record, if any.  The court may provide for additional notice
to the defendant. 
14 Maryland Rule 2-613(d) provides:
(d) Motion by defendant. The defendant may move to vacate the
order of default within 30 days after its entry.  The motion shall state
the reasons for the failure to plead and the legal and factual basis for
the defense to the claim.
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entered against him and the matter was scheduled for an evidentiary hearing.  See Maryland
Rule 2-613 (b).12  Although notified by the clerk of the court that the order of default had
been entered, see Maryland Rule 2-613(c),13 Respondent did not move to vacate the order,
as allowed by Rule 2-613(d).14  Respondent, however, did appear at the December 20, 2007
15 The averments contained in the Petition For Disciplinary or Remedial Action were
admitted at the hearing, and Respondent was not permitted to deny or contradict the
averments.  See Maryland Rule 2-323 (e).  Respondent, however, contested Bar Counsel’s
proposed conclusion of law concerning Rule 8.4 (c).  Upon considering Respondent’s
argument regarding his conduct and Rule 8.4 (c), the hearing judge concluded that
Respondent’s conduct did not violate Rule 8.4 (c).
-6-
hearing.15 
On January 29, 2008, Judge Daniels issued findings of fact and conclusions of law,
in which he found that Respondent violated Rules 1.1, 1.3, 1.5 (a), 1.15 (a), 1.15 (d) and (e),
1.16 (d), 8.1(b), but not Rule 8.4 (c).  Judge Daniels’ findings of fact and conclusions of law
read in pertinent part:  
The Respondent, Ernest S. Nichols, Esquire, is a member of the
Maryland Bar, with an office in Bel Air, Maryland.  Charles Caralle
retained Mr. Nichols to represent him in connection with personal
injuries sustained in an automobile accident in 2003.  Mr. Caralle
subsequently retained Mr. Nichols to represent him to file a petition
for discharge in bankruptcy.
Mr. Nichols prepared and filed the bankruptcy petition, which
failed to identify the personal injury claim as an asset.  Mr. Nichols
later disclosed the personal injury claim to the Bankruptcy Trustee,
Bud Stephen Tayman, Esquire, at the meeting of creditors.
Mr. Tayman's office wrote to Mr. Nichols on September 29,
2003, to determine the status of the personal injury case.  On October
6, 2003, Mr. Nichols wrote to Mr. Tayman, stating that the case was
still unsettled, that he believed that the medical bills exceeded the
policy limits and that it was unlikely that Mr. Caralle would receive
any money from the case.
The Bankruptcy Court discharged Mr. Caralle's debts in late
2003.  Mr. Nichols negotiated a settlement for policy limits, which
was, in fact, $100,000.00.  Mr. Caralle signed a release on January 23,
2004.  Mr. Tayman wrote to Mr. Nichols on February 29, 2004,
inquiring about the status of the case.  On March 15, 2004, Mr.
Nichols replied to Mr. Tayman, informing him that the case had
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settled for $100,000.00, that he disbursed $43,279.29 to himself for
attorney's fees and expenses, and that he disbursed $30,000.00 to Mr.
Caralle.  He stated that he retained the remaining portion of the
settlement proceeds in his escrow account to pay medical bills.
The Bankruptcy Trustee made several attempts to discuss this
matter with Mr Nichols.  He informed Mr. Nichols that the proceeds
of the settlement of the personal injury claim were an asset of the
Bankruptcy estate and that Mr. Nichols could not take a fee without
approval of the Bankruptcy Court.  Mr. Tayman believed that Mr.
Nichols should have turned over the remaining funds to him.
 
Mr. Caralle discharged Mr. Nichols in August 2005, and
directed him to send a copy of his file to Caralle's new attorney,
Thomas Dolina, Esquire.  Mr. Nichols claims he sent the file to Mr.
Dolina on February 21, 2006.  Mr. Caralle filed a malpractice suit
against Mr. Nichols.  In April 2006, he filed a complaint with the
Attorney Grievance Commission.
Mr. Nichols forwarded a check to Mr. Tayman in the amount
of $33,962.38 on August 31, 2006, representing the funds retained
from the settlement proceeds.  Although Mr. Tayman has repeatedly
explained that Mr. Nichols is not entitled to his attorney's fee without
approval of the Bankruptcy Court, Mr. Nichols did not return that fee.
Attorney Grievance Commission Investigator, Sterling H. Fletcher,
interviewed Mr. Nichols on August 23, 2006.  At that meeting, Mr.
Fletcher asked Mr. Nichols to produce records concerning his escrow
account and the transactions related to Mr. Caralle's case.  Mr.
Nichols promised to submit the documents by September 16, 2006.
Assistant Bar Counsel wrote to Mr. Nichols on October, 11, 2006, to
request the records.  Mr. Nichols failed to respond to that request.
The Petitioner alleges that Mr. Nichols violated Maryland
Rules of Professional Conduct 1.1 (competence), 1.3 (diligence), 1.5
(a) (fees), 1.15 (safekeeping of property), 1.16 (d) (declining or
terminating representation), 8.1 (b) (bar admission and disciplinary
matters) and 8.4 (c) (misconduct).
Mr. Nichols failed to competently represent his client, Mr.
Caralle, by failing to include his personal injury claim as an asset
when he prepared the bankruptcy petition, by failing to notify the
Bankruptcy Trustee of the settlement before funds were disbursed,
and by disbursing a large portions of the settlement funds when the
Bankruptcy Trustee had a claim to the funds. Respondent's conduct
violated Rule 1.1 of the Maryland Rules of Professional Conduct.
-8-
At several points in the representation, Respondent failed to act
diligently on behalf of his client in violation of Rule 1.3.  He did not
promptly notify the Trustee of the settlement of the personal injury
case.  He took a year and a half to deliver the retained funds to the
Trustee. He did not respond to the Trustee's messages.  He took an
inordinate amount of time to forward the client's file to new counsel.
Respondent's fee was unreasonable, in violation of Rule 1.5(a)
of the Maryland Rules of Professional Conduct.  Respondent was
required to obtain permission of the Bankruptcy Court before taking
a fee from the settlement proceeds.  He failed to obtain that
permission and did not return the fee.
Respondent failed to notify promptly the Bankruptcy Trustee
that he had received the settlement funds even though he was aware
of the claim of the bankruptcy estate.  He disbursed $30,000.00 to his
client despite the Trustee's claim to those funds.  He disbursed
attorney's fees and costs to himself even though his fee had not been
approved.  He then retained over $33,000 for a year and a half before
turning the funds over to the Trustee.  By this conduct, Respondent
violated Rule 1.15 (d) and (e).
Respondent violated Rule 1.16 (d) of the Maryland Rules of
Professional Conduct by failing to forward the client's file to his new
attorney for a period of six months. 
Respondent violated Rule 8.1 (b) by failing to produce bank
records regarding his handling of the settlement funds despite the
requests of the Commission Investigator and Assistant Bar Counsel
Respondent is alleged to have engaged in acts of dishonesty,
deceit and misrepresentation in violation of Rule 8.4 (c) of the
Maryland Rules of Professional Conduct.  His initial failure to
disclose the existence of the personal injury claim appears to have
been inadvertent since he disclosed the claim to the Trustee at the
meeting of creditors.  The Respondent believed that the policy limits
would be insufficient to cover his client's medical bills when he made
that representation to the Trustee.  After he made that representation
and obtained his client's discharge in bankruptcy, Respondent failed
to inform the Trustee that he was settling the case for a substantially
larger amount until after he made the improper disbursements to
himself and his client, and then only after the Trustee made an inquiry.
The Court finds that there is not clear and convincing evidence to
establish that Respondent's conduct, under these circumstances, was
dishonest or deceitful.  Accordingly, the Court finds that Respondent
16 Maryland Rule 16-759 (b)(2) provides in relevant part: 
(B) Review by Court of Appeals. 
* * * 
(2) Findings of Fact.  (A) If no exceptions are filed.  If no exceptions
are filed, the Court may treat the findings of fact as established for the
purpose of determining appropriate sanctions, if any.
17  Maryland Rule 16-759 (b)(1) provides: 
(continued...)
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did not violate Rule 8.4.
In summary, this [c]ourt finds by clear and convincing
evidence that the Respondent, Ernest S. Nichols, Esquire, violated
Rule 1.1, 1.3, 1.5 (a), 1.15 (d) and (e), 1.16 (d), 8.1 (b) of the
Maryland Rules of Professional Conduct. 
Neither Respondent nor Bar Counsel filed exceptions to the hearing court’s findings
of fact or conclusions of law.  Thus, pursuant to Maryland Rule 16-759 (b)(2),16 we elect to
“treat the findings of fact as established for the purpose of determining appropriate sanctions,
if any.”  See Attorney Grievance Commission v. Elmendorf, 404 Md. 353, 360, 946 A.2d 542,
546 (2008); Attorney Grievance Commission v. Logan, 390 Md. 313, 319, 888 A.2d 359, 363
(2005).  After a review of the record, we are satisfied that the hearing judge’s findings of fact
are not clearly erroneous.  See Attorney Grievance Commission v. Dunietz, 368 Md. 419,
428, 795 A.2d 706, 711 (2002) (noting that despite neither the respondent nor Bar Counsel
taking exceptions to the hearing judge’s factual findings, the Court shall review the factual
findings to ensure that they are not clearly erroneous).  Moreover, upon a our de novo review
of the hearing court's conclusions of law, we hold that the conclusions of law are supported
by clear and convincing evidence.  Maryland Rule 16-759 (b)(1);17 Dunietz, 368 Md. at 428,
17(...continued)
(B) Review by Court of Appeals.  Conclusions of law.  The Court of
Appeals shall review de novo the circuit court judge’s conclusions of
law. 
-10-
795 A.2d at 711.
We are thus left only to resolve the question as to the appropriate sanction to be
imposed.  Bar Counsel recommends an indefinite suspension.  Bar Counsel contends that
“Respondent’s unauthorized taking of a fee without approval of the Bankruptcy Court is
analogous to the taking of a fee from an estate without complying with the relevant statute
or obtaining permission of the Orphans’ Court.”  Bar Counsel then points to several recent
cases where we indefinitely suspended an attorney for the unauthorized taking of fees
without appropriate judicial approval:  Attorney Grievance Commission v. Kendrick, 403 Md.
489, 943 A.2d 1173 (2008); Attorney Grievance Commission v. Seiden, 373 Md. 409, 818
A.2d 1108 (2003); Attorney Grievance Commission v. Thompson, 376 Md. 500, 830 A.2d
474 (2003); Attorney Grievance Commission v. Eisenstein, 333 Md. 464, 635 A.2d 1327
(1994).  Respondent makes no recommendation as to sanction; however, he does request that
we take into consideration the potential hardship a suspension would have on his family
because he is the sole provider. 
“It is well settled that our obligation in disciplinary matters is to protect the public and
maintain the public’s confidence in the legal system rather than to punish the attorney for
misconduct.”  Attorney Grievance Commission  v. Ward, 394 Md. 1, 32-33, 904 A.2d 477,
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496 (2006).  This Court’s goal “when imposing sanctions[,] is to maintain the integrity of the
legal profession and to prevent misconduct by other attorneys.”  Id. at 33, 904 A.2d at 496.
The severity of the sanction depends on several things, including “the circumstances of each
case, the intent to which the acts were committed, the gravity, nature and effects of the
violations as well as any mitigating factors.”  Id.  To be sure, we have stated that “the gravity
of misconduct is not measured solely by the number of rules broken but is determined largely
by the lawyer’s conduct.”  Attorney Grievance Commission v. Briscoe, 357 Md. 554, 568,
745 A.2d 1037, 1044 (2000).  
Violations of the Rules stemming from the taking of fees without prior consent of the
appropriate judicial authority has warranted both disbarments and suspensions in prior cases
before this Court.  In our most recent case,  Attorney Grievance Commission v. Kendrick, 403
Md. 489, 943 A.2d 1173 (2008), we imposed an indefinite suspension because an attorney
failed to seek Orphans’ Court approval prior to taking a fee and failed to properly administer
the estate.  In Attorney Grievance Commission v. Seiden, 373 Md. 409, 818 A.2d 1108
(2003), we imposed an indefinite suspension, with leave to reapply after thirty days, because
an attorney took his fee from the estate without the permission of the Orphans’ Court.  In
Attorney Grievance Commission v. Thompson, 376 Md. 500, 830 A.2d 474 (2003), we
imposed an indefinite suspension because an attorney mishandled the administration of an
estate, failed to timely file reports and accounts, failed to pay estate taxes at the time of
distribution, and failed to obtain prior approval of the Orphans’ Court before taking fees.  In
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Attorney Grievance Commission v. Sullivan, 369 Md. 650, 801 A.2d 1077 (2002), we
disbarred an attorney who, as the personal representative of an estate, failed to administer the
estate and took over $50,000 from the estate without prior approval of the Orphans’ Court.
In Attorney Grievance Commission v. Owrutsky, 322 Md. 334, 587 A.2d 511 (1991), we
suspended an attorney for three years for his careless and neglectful handling of an estate,
his mishandling of estate funds, and his taking of fees without prior court approval.  In
Attorney Grievance Commission v. Eisenstein, 333 Md. 464, 635 A.2d 1327 (1994), we
suspended an attorney for two years for taking a fee in a Longshore and Harbor Workers’
Compensation Act case before the fee had been approved by an administrative law judge. 
Under the totality of the circumstances and in light of our relevant prior cases, we
conclude that the appropriate sanction in the present case is an indefinite suspension.  In this
case, the hearing judge concluded, and we agree, that Respondent’s misconduct was due
neither to dishonesty nor to criminal conduct, but rather due to lack of diligence as well as
incompetence in bankruptcy matters.  Indeed, this is Respondent’s first disciplinary
proceeding in over thirteen years of practicing law.  Respondent acknowledges his
misconduct as he agrees that he did not seek proper authorization from the Bankruptcy Court
before taking his fee and did not follow federal bankruptcy law in his disbursement of the
settlement award to his client.  
We cannot say, however that he has taken adequate steps to remediate his conduct.
It appears from the record, for example, that Respondent has yet to seek approval of his
18 Mr. Caralle’s personal injury claim became an asset of the bankruptcy estate when
he filed his Chapter 7 petition on June 23, 2003.  11 U.S.C. § 541 (a) (1); see also In re
USinternetworking, Inc., 310 B.R. 274, 281 (Bankr. D. Md. 2004) (noting that courts have
interpreted 11 U.S.C. § 541(a)(1) to include “all causes of action that could be brought by
a debtor”).  Ordinarily,  pursuant to 11 U.S.C. § 330, an attorney (or other professional), prior
to deducting a fee from the proceeds of a settlement or judgment that is the property of a
bankruptcy estate, must first secure the bankruptcy court’s approval.
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attorney’s fee from the Bankruptcy Court.18  In addition, Respondent failed to cooperate with
Bar Counsel and the Attorney Grievance Commission in answering their demands for
information. 
The suspension shall commence thirty (30) days after the filing of this Opinion. 
IT IS SO ORDERED.  RESPONDENT SHALL PAY
ALL COSTS AS TAXED BY THIS COURT,
INCLUDING THE COST OF TRANSCRIPTS,
PURSUANT TO MARYLAND RULE 16-761 FOR
WHICH SUM JUDGMENT IS ENTERED IN
FAVOR OF THE ATTORNEY GRIEVANCE
COMMISSION AGAINST ERNEST S. NICHOLS.
In the Circuit Court for Baltimore County
Case No. C-07-009722
IN THE COURT OF APPEALS
OF MARYLAND
Misc. Docket AG No. 25
September Term, 2007
ATTORNEY GRIEVANCE COMMISSION
OF MARYLAND
v.
ERNEST S. NICHOLS
Bell, C.J.
Harrell
Battaglia
Greene
Murphy
Raker, Irma S. (Retired, Specially
Assigned)
Cathell, Dale R. (Retired, Specially
Assigned)
JJ.
Dissenting Opinion by Raker, J.
Filed: June 17, 2008
Raker, J., Dissenting:
I would impose a suspension of thirty days.