Opinion ID: 1562683
Heading Depth: 1
Heading Rank: 17

Heading: Failure to Account Violations

Text: At the time of the representation in this case, Rule 1.15(a) provided, in pertinent part: 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 in a bank or similar institution in the state where the lawyer's office is situated, or elsewhere with the consent of the client or third person.... Complete records of such account funds and other property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation. Rule 1.15(b) provided, in pertinent part, that 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. The ODC alleges that respondents failed to properly maintain records regarding the representation of Mr. Palowsky and Gulf States and, despite repeated demands by Mr. Palowsky between 1996-2003, respondents have never provided him with an accounting. Both the hearing committee and the disciplinary board rejected these charges, reasoning that the evidence in the record established that Mr. Hart controlled the Palowsky/Gulf States files while he was at the firm and took these files with him when he left the firm in 2001. Additionally, they found that respondents did provide an accounting, even though the accounting may not have been to Mr. Palowsky's satisfaction. At the outset, we note the accounting to which the committee and board referred consisted of nine hundred and twenty pages of documents, consisting primarily of hourly billing and cost invoices generated from the firm's computer records. To suggest that this mass of paper may be called an accounting in compliance with Rule 1.15(b) is to make an utter mockery of that rule. Moreover, respondent, Mr. Spillers, acknowledged in a 2003 letter to Mr. Palowsky's attorney that the documents did not constitute an accounting, explaining, [w]e do not consider the enclosed to be the `full and complete' accounting that was requested by the clients. Thus, the hearing committee's factual finding that respondents provided an accounting is clearly wrong and must be rejected. [19] Likewise, to the extent the hearing committee determined Mr. Hart's removal of the files made it impossible for respondents to render an accounting, we find such a conclusion to be unsupported by the record. As a threshold matter, we note it is by no means clear from the record whether Mr. Hart actually took the financial records relating to the Palowsky/Gulf States litigation at the time he left the firm. [20] However, assuming for sake of argument that he did so, the record reveals that other means were available to respondents whereby they could have rendered an accounting. In particular, the firm's bookkeeper testified that the firm retained numerous financial documents from the Palowsky litigation, such as cancelled checks, records of deposits, and ledger entries. Similarly, Will Sartor, a member of the firm who assisted Mr. Theus in the attempted 1998 accounting, testified the bills themselves should have reflected exactly what's paid by the client, and would have been entered into our accounting system.... Given this evidence, we find no impediment existed to respondents rendering an accounting as required by Rule 1.15(b). [21] The ODC further alleges respondents violated Rule 1.16(d), which provides, in pertinent part, [u]pon 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 that has not been earned. Specifically, the ODC asserts respondents violated this rule by refusing to credit Mr. Palowsky with hourly fees and costs previously paid against the contingent fee. The hearing committee and disciplinary board determined, among other things, [22] that there was no clear and convincing evidence that the firm owed a refund of fees to Mr. Palowsky/Gulf States. Thus, they concluded this rule was not violated by respondents. Based on our review of the record, we cannot say this finding is manifestly erroneous. Mr. Palowsky's testimony indicates he paid over $200,000 in hourly fees and costs, which should have been credited against the contingency fee. However, respondents produced evidence that the firm handled matters other than the bank litigation matter on Mr. Palowsky's behalf which were not covered by the contingency fee agreements. Under these circumstances, we cannot say the ODC has established by clear and convincing evidence that respondents violated Rule 1.16(d) by failing to credit Mr. Palowsky's hourly fees against the contingency fee. However, insofar as Rule 1.16(d) requires respondents to furnish an accounting to their client, we find respondents violated this portion of the rule for the reasons contained in our discussion of the Rule 1.15(b) violation. Finally, the ODC alleges respondents violated Rule 8.4(c), which prohibits an attorney from engaging in conduct involving dishonesty, fraud, deceit or misrepresentation. Specifically, the ODC asserts two of the respondents (Mr. Spillers and Mr. Theus) failed to credit Mr. Palowsky's account with cash payments made by him totaling $19,000. In finding the committee correctly rejected this charge, the board observed there was no evidence, other than Mr. Palowsky's self-serving testimony, to establish the existence of the alleged cash payments. Our review of the record indicates that while there is some corroboration for Mr. Palowsky's testimony, it does not rise to the level of clear and convincing proof. Accordingly, we see no manifest error in the committee's finding that this charge was not proven.