Court Opinion

ID: 853425
Source: CourtListenerOpinion
Date Created: 2013-03-02 01:25:59.194348+00
Date Added: 2024-06-11T09:04:37.380473
License: Public Domain

FOR THE RESPONDENT           FOR THE INDIANA SUPREME COURT

                                       DISCIPLINARY COMMISSION

Terry L. Smith                               Donald R.  Lundberg,  Executive
Secretary
Smith & DeBonis                   115 West Washington Street
9696 Gordon Drive                            Suite 1165
Highland, IN 46322                      Indianapolis, IN 46204

      IN THE

      SUPREME COURT OF INDIANA

IN THE MATTER OF               )
                                    )  Case No. 45S00-9904-DI-233
MICHAEL J. GALANIS             )

      DISCIPLINARY ACTION

                               March 19, 2001

Per Curiam

      The respondent, Michael J. Galanis, agreed in writing to  represent  a
client in her personal injury lawsuit in exchange for  forty  percent  (40%)
of her recovery.  The respondent ultimately retained fifty percent (50%)  of
the recovery – $20,000 more than agreed – and refused the  client’s  demands
for the return of the excess fees.   We  suspend  the  respondent  from  the
practice of law in Indiana for ninety (90) days for such misconduct.
      Having been admitted to the bar of this state in 1979, the  respondent
is  subject  to  our  disciplinary  jurisdiction.   A  hearing  officer  was
appointed to this case, and, after a hearing, tendered his  report  to  this
Court.    The   hearing   officer   determined   the   respondent   violated
Ind.Professional Conduct Rule 1.5(a) by charging an unreasonable fee.
      Neither the respondent nor the Disciplinary Commission has  petitioned
this Court for review of the hearing officer's report.   Where  the  hearing
officer's  report  is  unchallenged,  we  accept  and  adopt  the   findings
contained therein but reserve final judgment as to misconduct and  sanction.
 Matter of Kristoff, 611 N.E.2d 116 (Ind. 1993).
      Within  that  review  framework,  we  now  find  a  client  hired  the
respondent in 1993 to represent  her  in  her  pending  claim  for  personal
injuries arising from an automobile accident.  The fee agreement  signed  by
the respondent and his  client  called  for  the  respondent  to  receive  a
contingent fee of  forty percent (40%) of the gross amount recovered by  the
filing of a lawsuit, plus expenses.  The  agreement  further  provided  that
the  client  would  pay  an  additional  ten  percent  (10%)  of  the  gross
settlement  if  it  were  appealed  by  another  party  to  the  litigation.

      A jury returned a verdict of $250,000 for the client.   The  defendant
filed a motion to correct  errors  in  which  she  urged  that  the  damages
awarded by the jury – which were $150,000 more than her available  insurance
coverage – were excessive and should be reduced.  The respondent, on  behalf
of his client, filed a brief opposing the motion  to  correct  errors.   The
trial court denied the motion.
      The respondent began  investigating  the  availability  of  collecting
directly from the defendant the $150,000 of  the  judgment  not  covered  by
insurance. He determined that the defendant had  been  declared  incompetent
and was under a guardianship.  He further determined that  the  guardianship
did not have sufficient assets to satisfy the excess judgment.
      That led the respondent to investigate  whether  the  defendant  might
have grounds for a claim against the  defendant’s  insurer  for  bad  faith.
The  respondent  ultimately  determined  a  factual  basis  for  that  claim
existed.  The respondent negotiated with the defendant’s  attorney,  seeking
an agreement under which the defendant would assign her claim of  bad  faith
judgment to the client in  exchange  for  a  covenant  not  to  execute  the
judgment against the  defendant.   In  response,  the  defendant’s  attorney
initially offered to resolve the personal injury  lawsuit  for  $150,000  --
$100,000 less than the judgment but $50,000 more  than  available  insurance
coverage.   Eventually,  the  respondent  and   the   defendant’s   attorney
negotiated a $200,000 settlement which did not  include  assignment  of  any
bad faith claim which the defendant had against her insurer.
      On or about April 28, 1994, the client went to the respondent’s office
to approve the disbursement of the  settlement.   The  respondent  gave  the
client a disbursement statement calling for his  retention  of  $100,000  in
attorney fees  –  the  equivalent  of  fifty  percent  (50%)  of  the  total
settlement.  The statement indicated the  settlement  was  for  a  claim  of
damages arising out of the automobile accident and  did  not  indicate  that
any of the fees were calculated on an  hourly  basis.   The  statement  also
made no reference  to  compensation  for  an  independent  bad  faith  claim
against the insurer.
      The client later objected  to  the  disbursement,  claiming  that  the
respondent was entitled to forty percent (40%) of the  settlement  proceeds,
not fifty percent (50%), because the case  was  not  appealed.   Though  not
disputing that no appeal occurred, the respondent refused to return the  ten
percent (10%).  He testified at hearing that  he  spent  more  than  eighty-
three (83) hours researching the  potential  bad  faith  claim  against  the
defendant’s insurer and that his normal billing  rate  was  $250  per  hour.
Thus, he asserted his time on the bad faith claim was worth about $21,000.
      We find that the respondent violated Prof.Cond.R. 1.5(a)  by  charging
an unreasonable fee.  Under the fee agreement,  he  was  entitled  to  forty
percent (40%) of the $200,000 -- $80,000.  The  hearing  officer’s  findings
indicate the respondent justified the  $100,000  fee  by  asserting  he  was
entitled to $20,000 in hourly fees for his work on the bad  faith  claim  in
addition to the forty percent (40%) of the  $200,000  settlement  authorized
by the fee agreement.  This approach rests on his  assertion  that  the  bad
faith claim was a  separate  action  to  which  a  different  fee  structure
applies.
      The respondent’s argument fails.  First, the fee  agreement  does  not
specify that the respondent is entitled  to  an  hourly  rate  nor  does  it
specify an hourly rate.  The fee  agreement  only  refers  to  a  percentage
recovery of any gross amount recovered  from  the  lawsuit.   Moreover,  the
disbursement statement does not reflect any hourly billing rate.   It  notes
a total settlement of $200,000 and attorney fees  of  $100,000.   While  the
respondent contends the bad faith  claim  was  separate  from  the  client’s
personal  injury  claim,  the  respondent  and  the  client  negotiated  and
finalized only one fee agreement.  Nothing in that  fee  agreement  suggests
that the personal injury and bad faith claims are separate actions to  which
separate billing procedures will apply.
      In fact, the bad faith claim was not a separate action  in  which  the
respondent was representing his client and for  which  he  was  entitled  to
separate fees totaling  $20,000.   The  bad  faith  claim  belonged  to  the
defendant in the personal injury lawsuit, not the respondent’s client.   The
defendant’s possible bad faith claim against her insurer  was  an  asset  of
the defendant which the respondent discovered during his efforts to  collect
his client’s personal injury judgment.   To the extent that  the  respondent
researched the merits of a bad faith claim against the insurer,  he  did  so
only as a means of collecting the judgment in his client’s  personal  injury
lawsuit.
      Where there is a written fee agreement specifying the amount of  legal
fees the client will pay, an attorney’s retention  of  a  fee  greater  than
that specified in the agreement is strongly indicative  of  an  unreasonable
fee.  Matter of Lehman, 690 N.E.2d 696  (Ind.  1997).   In  this  case,  the
respondent retained fifty percent (50%)  of  the  settlement  when  the  fee
agreement provided for forty percent (40%).  He has failed to establish  any
legitimate grounds for retaining the additional ten percent (10%)  as  fees.
Accordingly,  we  find  the  respondent  charged  an  unreasonable  fee,  in
violation of Prof.Cond.R. 1.5(a).
      Given our finding of misconduct,  we  must  determine  an  appropriate
sanction.  In doing so, we consider the misconduct, the  respondent’s  state
of mind underlying the misconduct, the duty of this court  to  preserve  the
integrity of the  profession,  the  risk  to  the  public  in  allowing  the
respondent to continue  in  practice,  and  any  mitigating  or  aggravating
factors.  Matter of Mears, 723 N.E.2d 873 (Ind. 2000).   The  reasonableness
of an attorney’s fee is an important question of public  import  with  broad
implications; it has an impact on the availability of legal services to  the
public and the administration of justice, and, ultimately, reflects  on  the
attorney’s status.  Matter of Benjamin, 718 N.E.2d 1111 (Ind. 1999).
       The respondent attempted to take fifty percent (50%) of his  client’s
recovery when he was entitled to only forty percent (40%).  When the  client
objected and sought return of the excess fees, the respondent  refused  and,
to justify his excessive fee, claimed that he was  entitled  to  $20,000  in
hourly fees.   In light of the substantial amount of the  unreasonable  fee,
we find that the respondent’s misconduct warrants a  significant  period  of
suspension.
      It is, therefore, ordered that the respondent, Michael J. Galanis,  is
hereby suspended from the practice of law for ninety  (90)  days,  beginning
April 23,  2001.   At  the  conclusion  of  this  suspension,  he  shall  be
automatically reinstated if he has:  1)  fully  reimbursed  the  client  the
$20,000 in fee overcharges; 2) provided proof of such reimbursement  to  the
Commission before the 80th day of his suspension;  and  3)  paid  the  costs
assessed in this proceeding.  If such conditions  are  not  met  before  the
expiration of the ninety (90) day suspension,  the  respondent’s  suspension
shall continue until he successfully petitions  for  reinstatement  pursuant
to Ind. Admission and Discipline Rule 23(4).
      The Clerk of this Court is directed to provide notice of this order in
accordance with Admis.Disc.R. 23(3)(d) and  to  provide  the  Clerk  of  the
United States Court of Appeals for the Seventh Circuit, the  Clerk  of  each
of the United States District Courts in this state, and the  Clerk  of  each
of the United States Bankruptcy Courts in this state  with  the  last  known
address of the respondent as reflected in the records of the Clerk.
      Costs of this proceeding are assessed against the respondent.