Opinion ID: 1464230
Heading Depth: 1
Heading Rank: 2

Heading: Misconduct Related to Client Escrow Account

Text: The trial court's consideration of the complaints of David Grove and Bar Counsel consisted of an examination of an allegation of misconduct arising out of Snyder's operating procedures at his firm concerning the treatment of client funds received by the firm as fixed fees or retainers for legal services. The evidence presented showed that Snyder served as the managing partner at the law firm of Snyder & Poole, P.A. (hereinafter, the Firm), from January 1, 1989 until the Firm's dissolution on December 28, 1992. The Firm's dissolution followed a year of cash flow problems and multiple resignations of associate attorneys. Following dissolution of the Firm, Snyder opened his own law office and continued to practice law in a firm called Snyder, Attorneys at Law. In his capacity as managing partner at Snyder & Poole, Snyder handled the day-to-day operations of the Firm, established policies and had final authority with regard to the Firm's escrow account, and along with Lori Snyder, his wife at that time, developed administrative policies and operational procedures for the Firm. One of the Firm's operating policies consisted of a system whereby the advance fee payments of clients were deposited directly into the Firm's general operating account, unless the fee payment included court costs. For the latter, the policy was to deposit the payment into the client trust account and immediately transfer the fee portion to the general account. Thus, the fees were immediately paid out to the Firm's general operating account prior to being earned. The clients, however, were provided with invoices reflecting incremental deductions against the retainer based upon the hourly billings of the attorneys for work performed on behalf of the clients. Snyder continued to employ these operating procedures at Snyder, Attorneys at Law. On February 19, 1993, an involuntary Petition for Bankruptcy was filed by several banks against Snyder and his wife, Lori. Accordingly, the couple's personal bank accounts were frozen. In the period from February 23, 1993 to March 9, 1993, Snyder took funds from his personal credit cards and line of credit advances and deposited them into the Snyder, Attorneys at Law client escrow account. Thereafter, Snyder and his wife withdrew the funds from the escrow account for themselves and others. Contemporaneous with Snyder's laundering of personal funds through the client escrow account, Snyder deposited a check for fees and costs from client Madison Walters in the amount of $2,600 into the Snyder, Attorneys at Law escrow account. Walters's check, however, was returned due to insufficient funds within six days of its being deposited into the escrow account, and the escrow account was debited for the amount of the check. Despite his knowledge that Walters's check had been dishonored, Snyder disbursed $2,300 from the escrow account into his firm's operating account as the fee for Ms. Walters on March 23, 1993 and thereby created a $2,300 deficit in the firm's escrow account. In March of 1993, Snyder also received shipments of a powdered drink supplement from Power Shack, for purposes wholly unrelated to his practice of law. [14] Snyder authorized payment for the Power Shack shipments from the firm's escrow account on more than one occasion, despite the fact that the escrow account contained no funds for that purpose. Thereafter, Snyder replenished the deductions he made from the escrow account for the shipment payments with funds received from a business that purchased the drink supplement from him. The circuit court's findings regarding these transactions were as follows:
Steven C. Kessell, Esquire, worked as an associate attorney for the Firm from its inception until approximately December 11, 1992. Mr. Kessell had entered into an employment agreement with the Firm whereby he would be paid forty percent (40%) of the first one hundred thousand dollars ($100,000) in fees he generated and forty-five percent (45%) of the amount generated above one hundred thousand dollars ($100,000). Mr. Kessell interviewed new clients and entered into fee arrangements with those clients on behalf of [t]he Firm. He also set the amount of retainers in cases to be charged on an hourly basis, received those retainers and directed that they be deposited to the trust account. It was the policy of the Firm to treat those advance fee payments as collected revenue for the purpose of determining Mr. Kessell's salary. Mr. Kessell testified that Madeline Friend, Helen Cain, James Metz, Mary Sue Weber, William McKenzie, Eugene Michels and Michael Wright were all hourly clients who paid retainers that should have been segregated and not charged against until actual services were rendered. The client ledger cards for Madeline Friend, Helen Cain and James Metz indicate that the retainers for those clients were deposited into the trust account at Mr. Kessell's direction and within a few days the fee amount was disbursed from the trust account to the Firm's general account. When Mr. Kessell left the Firm in December 1992, certain clients, including those clients referred to above, elected to have him take their cases with him and requested that the Firm return any unearned fees. Mr. Kessell received a letter dated February 3, 1993, from Lori Snyder providing a check in the amount of two thousand, six hundred twenty-two dollars ($2,622), representing a return of fees for certain clients who chose to have Mr. Kessell continue to represent them. The check enclosed in that letter was drawn on the Snyder, Attorneys at Law accounts payable account, not an escrow account. The check for two thousand, six hundred twenty-two dollars ($2,622) represented sixty percent (60%) of the actual unearned fees to be refunded to the clients who continued with Mr. Kessell. The Firm had deducted forty percent (40%) because Mr. Kessell had been paid that percentage of those unearned fees when they were transferred to the operating account and treated as collected fees. Although he disputed the Firm's deduction of forty percent (40%) of the unearned fees due to be refunded to those clients, Mr. Kessell provided further services at no charge to the clients to make up the forty percent (40%) that was deducted.
David M. Grove, Esquire, was employed by the Firm in March 1992. Mr. Grove entered into an employment agreement which provided that the first year he would be paid a salary of fifty-two thousand dollars ($52,000) and thereafter he would be compensated on the basis of forty percent (40%) of the first one hundred thousand dollars ($100,000) of collected gross revenues generated by him and forty-five percent (45%) of the gross collected revenues in excess of one hundred thousand dollars ($100,000). Mr. Grove interviewed new clients and entered into fee agreements with those clients on behalf of the Firm. Mr. Grove set the amount of retainers on cases to be charged on an hourly basis, received those retainers and turned them over to the office manager for deposit. Mr. Grove understood that the retainers on hourly cases would be deposited into an account separate from an operating account. Mr. Grove testified that Edward Flynn, Roma Haddaway, Leslie Marko and Maxie Wilburn were all hourly clients who paid retainers in advance of any work being performed on their cases. John Reburn, the Attorney Grievance Commission Investigator, testified that based upon his review of the Firm's escrow account records, none of those retainers were deposited into a firm escrow account. Mr. Reburn's review of the cash received and fees charged journal for the Frederick office of the Firm reflected receipt of the retainer fees for Leslie Marko and Maxie Wilburn and deposit of those fees to the general operating account. Mr. Grove resigned on December 28, 1992, prior to his one year anniversary and was never paid on a percentage basis. When Mr. Grove left the Firm, certain clients, including those clients referred to above, elected to have him take their cases with him and requested the Firm return any unearned fees. [Snyder's] successor firm, Snyder, Attorneys at Law, withheld forty percent (40%) of the refunds due each of Mr. Grove's clients and forwarded the balance to Mr. Grove by check drawn on the accounts payable account despite the fact that Mr. Grove had never been paid on a percentage basis. Mr. Grove objected and eventually an agreement was reached whereby Mr. Grove would return the funds to Snyder, Attorneys at Law, and checks would be cut directly to the clients by [Snyder's] firm for the full amount of the refunds due. The funds returned by Mr. Grove were deposited into the Snyder, Attorneys at Law escrow account along with the forty percent (40%) withheld by the Firm. Refund checks were drawn on the Snyder, Attorneys at Law escrow account and sent to Mr. Grove's clients. A refund check in the amount of four hundred forty-nine dollars and fifty cents ($449.50) was sent to John Winpigler, one of Mr. Grove's clients. Mr. Winpigler's check was returned several times due to insufficient funds in the escrow account. Ultimately the Firm refunded Mr. Winpigler's fee from a non-escrow account.
On or about March 15, 1992, Dixie Mill Work Co., Inc., (hereinafter, Dixie Mill Work), through Joseph Filsinger, [15] retained [Snyder] regarding that company's financial problems. Mr. Filsinger testified that [Snyder] was given a retainer of three thousand dollars ($3,000) that was to be charged against on an hourly basis. [Snyder] deposited the three thousand dollars ($3,000) retainer to the Snyder & Poole, P.A. operating account on October 15, 1992. On or about December 10, 1992, [Snyder] was given a check for twelve thousand, five hundred dollars ($12,500), which represented an advance fee plus costs for a potential bankruptcy proceeding on behalf of Dixie Mill Work. Mr. Filsinger understood that the twelve thousand, five hundred dollars ($12,500) would be placed in an escrow account until a determination was made whether to file a Chapter 11 bankruptcy. On or about December 11, 1992, the twelve thousand, five hundred dollars ($12,500) was deposited into the Snyder & Poole escrow account. On that same day [Snyder] drew a check in the amount of twelve thousand dollars ($12,000) on the Snyder & Poole escrow account payable to Snyder & Poole, P.A., which check was deposited into the Snyder & Poole operating account. Dixie Mill work was able to work out its financial difficulties and determined it was not necessary to file for bankruptcy. On or about March 19, 1993, Joseph Filsinger, Chairman of the Board of Dixie Mill Work, wrote to [Snyder] requesting the return of the twelve thousand, five hundred dollars ($12,500) advance fee and costs as well as the return of any unearned portion of the initial three thousand dollar ($3,000) retainer. [Snyder] had spent the twelve thousand dollar ($12,000) advance fee and was unable to return those funds to Dixie Mill Work. [Snyder] repaid the twelve thousand, five-hundred dollars ($12,500), plus the unearned portion of the initial retainer, to Dixie Mill Work by monthly installments over the period July 1993 through October 1993. Based on the aforementioned testimony and evidence, the hearing judge concluded that Snyder violated Rules 1.15(a) and 8.4(c) and (d) of the MRPC and Maryland Rules BU4, BU7 and BU9 by virtue of the methods by which he handled his clients' advance fee payments and through his misuse of the client escrow account. Snyder filed two exceptions with regard to his use of the client trust account. He asserts that the hearing judge should have found by clear and convincing evidence that fixed fee agreements were the preferred means by which attorneys were to be retained and that the discretion for handling the fees rested with the individual attorneys. Snyder also excepted to the hearing judge's finding that he misappropriated client funds. We conclude that the hearing judge's findings of fact and conclusions of law concerning Snyder's use of the trust account were not clearly erroneous. Accordingly, Snyder's exceptions are overruled. We also find that Snyder violated Rules 1.15(a) and 8.4(c) and (d) of the MRPC and Rules BU7 and BU9 by commingling his personal funds with client funds in the escrow account, using the client escrow account to deliberately conceal personal assets from his creditors, and writing checks from the escrow account for his own personal purposes during the bankruptcy litigation. See Attorney Grievance Comm'n v. Milliken, 348 Md. 486, 517, 704 A.2d 1225, 1240 (1998). Snyder used the client escrow account as a repository for the personal assets he sought to conceal from his creditors during the pendency of his involuntary bankruptcy. When Snyder made the cash advances from his credit cards and deposited the funds in his client escrow account, he committed a fraud by improperly representing to his creditors and to the bankruptcy court that the funds were being held in the account for the benefit of a third party and thus, were outside of the bankruptcy proceedings. See Webster, 348 Md. at 677-78, 705 A.2d at 1142-43 (explaining, when an account is designated an attorney trust account, inquiry into the source of the funds within the account is irrelevant. Use of the trust account for personal purposes while still designated a trust account... is prohibited). Snyder's well-calculated attempt to conceal personal assets in conjunction with the bankruptcy proceedings resulted in the commingling of funds in violation of MRPC 1.15(a) and Rules BU7 and BU9. It also involved dishonesty, fraud, deceit, misrepresentation and conduct prejudicial to the administration of justice in violation of MRPC 8.4(c) and (d). See Attorney Grievance Comm'n v. Bernstein, 363 Md. 208, 229, 768 A.2d 607, 618 (2001)(finding that the attorney willfully misappropriated funds from his client trust account and commingled his personal funds with those of his clients resulting in his disbarment); Attorney Grievance Comm'n v. Hess, 352 Md. 438, 448, 722 A.2d 905, 910 (1999)(violation of MRPC 8.4(c) where attorney intentionally and repeatedly inflated billing with regard to one particular client); Attorney Grievance Comm'n v. Bailey, 286 Md. 630, 635-36, 408 A.2d 1330, 1333 (1979)(stating that if the evidence had shown that Bailey intended to steal or consciously misappropriate funds, the Court would have disbarred him). Finally, the client escrow account served as a conduit for Snyder's outside business venture with Power Shack. By writing unauthorized checks from the escrow account to pay for his shipments of Power Shack drink supplements, Snyder violated Rule BU9. The parties never argued any issues regarding Snyder's fourth exception as it relates to violations of Rule BU4 and BU7, concerning the depositing and holding of client funds in trust accounts. Furthermore, the sanction against Snyder remains the same regardless of whether we overrule or sustain his fourth exception. See Hess, 352 Md. at 450, 722 A.2d at 911(explaining that consideration of cumulative violations serves no useful purpose since it would not bear on the attorney's other violations and would not affect the sanction to be imposed); Attorney Grievance Comm'n v. Eisenstein, 333 Md. 464, 484, 635 A.2d 1327, 1336 (1994)(finding that consideration of overlapping violations does not measurably add to the seriousness of the conduct for purposes of considering the appropriate sanction). Therefore, we elect not to address Snyder's fourth exception.