Opinion ID: 1895294
Heading Depth: 3
Heading Rank: 2

Heading: The Steinberg Matter.

Text: Murray Steinberg contacted Karl Carter in September 1993 to discuss a civil rights action which he had filed in federal district court. After reviewing Steinberg's papers at Steinberg's home in Richmond, Virginia, Carter agreed that Steinberg had a viable claim and Steinberg gave Carter a check for $10,000 to get Carter and the firm started on his case. The two parties did not sign a contract at that time, however, and though the firm and Steinberg continued to negotiate over the terms of the representation, no signed agreement was ever reached. Upon his return to Washington, D.C., Carter gave the $10,000 check to respondent, who deposited Steinberg's check into the firm's general expense account on October 4, 1993, rather than the escrow account as was originally intended. [2] Respondent testified that because he was preoccupied with other matters, he did not realize his mistake until more than a year and a half later. On November 8, 1993, respondent was notified that the firm's escrow account at First American National Bank had been attached on behalf of the firm's landlord for the unpaid rent. The firm, in response, filed a motion to quash the writ of attachment in both the U.S. District Court for the District of Columbia and in the Superior Court. The District Court denied the firm's motion to quash on December 30, 1993, directing the firm to Superior Court for relief. The firm took no further action in Superior Court to quash the writ of attachment. On December 30, 1993, the firm, under the name Legal Counsel, Inc., filed for bankruptcy under Chapter 11. Respondent did not immediately inform Steinberg about either the writ of attachment nor the bankruptcy proceeding. On March 25, 1994, Steinberg wrote to Karl Carter discharging the firm and requesting the return of his $10,000 advance payment with interest. However, Steinberg received no response from either Carter nor respondent, until after Steinberg had sent a third request to Carter. On June 30, 1994, respondent wrote to Steinberg informing him that although the firm's usual policy was that retainer fees were non-refundable, he would make an exception in Steinberg's case and refund the retainer without interest. However, respondent also stated that the firm would be unable to give Steinberg a refund at that time because a writ of attachment had been placed on the firm's escrow account. Respondent suggested that Steinberg contact the bank directly to try to obtain the funds. Respondent did not tell Steinberg that the money was actually in the firm's expense account, nor that the firm had filed for bankruptcy. On July 25, 1994, Steinberg sued respondent's firm in the General District Court in Henrico County, Virginia. Respondent, on behalf of the firm, moved to dismiss Steinberg's civil action on the ground of forum non conveniens because of the firm's nonresidency in Virginia. The motion to dismiss was denied and Steinberg successfully obtained a judgment against the firm. Steinberg did not actually learn of the firm's pending bankruptcy until March 1995, when Karl Carter filed a notice of bankruptcy on behalf of the firm in response to a civil action filed by Steinberg in D.C. Superior Court to enforce his Virginia judgment. [3] On September 29, 1994, Steinberg filed a complaint with Bar Counsel concerning the unreturned $10,000. Following a written inquiry by Bar Counsel, respondent stated that although the firm was willing to refund the money to Steinberg, it would be unable to [do so] until the unlawful hold on our client escrow account is released by First Union Bank, N.A. [the successor bank to First American]. Instead, respondent suggested that Bar Counsel use its authority to compel the bank to release the monies in escrow. Again, respondent failed to mention that the firm was involved in bankruptcy proceedings and that the $10,000 had been deposited into the firm's operating account. On April 12, 1995, in response to a letter from Bar Counsel, respondent wrote that he had learned that the law firm's bank had released the attachment on the escrow account and that Steinberg would receive his money as soon as it was made available for disbursement. However, in May 1995, respondent notified the bankruptcy trustee that he had discovered that Steinberg's funds had been deposited into the firm's general account, rather than the escrow account as he had previously believed. Steinberg did not receive any money until June 23, 1995, when he reached a compromise settlement with the trustee for $4,200. Subsequent to the settlement, respondent wrote to Steinberg in August 1995, asking him to set up an appointment so that respondent could repay him the balance of the funds owed to him by the firm. However, when Steinberg arrived at the office on September 15, 1995, neither respondent nor a check for the remaining balance was there. In a letter to Steinberg dated November 10, 1995, respondent's law partner, Nathaniel Speights, notified Steinberg that the firm considered the debt discharged because he had compromised his claim with the bankruptcy trustee.