Court Opinion

ID: 2681024
Source: CourtListenerOpinion
Date Created: 2014-06-27 21:06:43.072998+00
Date Added: 2024-06-11T12:40:45.371814
License: Public Domain

Attorney Grievance Commission of Maryland v. Joseph Lee Friedman, Misc. Docket AG No.
49, September Term 2012

ATTORNEY MISCONDUCT — DISCIPLINE — DISBARMENT — Respondent,
Joseph Lee Friedman, violated Maryland Lawyers’ Rules of Professional Conduct 1.15(b)
and 8.4(c) and (d), as well as Maryland Rule 16-607. The violations stemmed from
Respondent’s depositing personal funds into his attorney escrow account in order to conceal
those funds from creditors. The appropriate sanction for Respondent’s violations is
disbarment.
Circuit Court for Baltimore County
Case No. 03-C-12-010757
Argued: February 11, 2014

                                     IN THE COURT OF APPEALS
                                          OF MARYLAND

                                        Misc. Docket AG No. 49

                                         September Term, 2012

                                       ATTORNEY GRIEVANCE
                                     COMMISSION OF MARYLAND

                                                    v.

                                       JOSEPH LEE FRIEDMAN

                                      Barbera, C.J.,
                                      Harrell
                                      Battaglia
                                      Greene
                                      Adkins
                                      McDonald
                                      Watts,
                                                   JJ.

                                         Opinion by Barbera, C.J.

                                         Filed: March 24, 2014
       On October 17, 2012, Petitioner, the Attorney Grievance Commission of Maryland

(“Commission”), acting through Bar Counsel, filed with this Court a Petition for Disciplinary

or Remedial Action (“Petition”) against Respondent, Joseph Lee Friedman. The Petition

alleged violations of the Maryland Lawyers’ Rules of Professional Conduct (“MLRPC”) and

the Maryland Rules in connection with Respondent’s depositing personal funds into an

attorney escrow account in order to shield those funds from garnishment by the United States

Internal Revenue Service (“IRS”). Specifically, the Petition alleged that Respondent had

engaged in professional misconduct by violating MLRPC 1.15(b) (safekeeping property)1 ;

MLRPC 8.4 (c) and (d) (misconduct)2 ; and Maryland Rule 16-607 (commingling of funds).3

       1
          MLRPC 1.15(b) provides: “A lawyer may deposit the lawyer’s own funds in a
client trust account only as permitted by [Maryland Rule 16-607(b)].”
       2
         MLRPC 8.4 provides, in relevant part:
               It is professional misconduct for a lawyer to:
                                             ***
               (c) engage in conduct involving dishonesty, fraud, deceit or
       misrepresentation;
               (d) engage in conduct that is prejudicial to the administration of
       justice;. . . .
       3
           Maryland Rule 16-607 provides:

              a. General Prohibition. An attorney or law firm may deposit in an
       attorney trust account only those funds required to be deposited in that account
       by [Maryland] Rule 16-604 or permitted to be so deposited by section b. of this
       Rule.

              b. Exceptions. 1. An attorney or law firm shall either (A) deposit into
       an attorney trust account funds to pay any fees, service charges, or minimum
       balance required by the financial institution to open or maintain the account,
       including those fees that cannot be charged against interest due to the
       Maryland Legal Services Corporation Fund pursuant to [Maryland] Rule 16-
                                                                               (continued...)
       On October 18, 2012, this Court designated the Honorable Patrick Cavanaugh of the

Circuit Court for Baltimore County (“the hearing judge”) to conduct an evidentiary hearing

and file written findings of fact and conclusions of law. See Md. Rules 16-752(a) and 16-

757(c). Respondent was served with process, in compliance with Maryland Rule 16-753, but

did not file a response to the Petition, timely or otherwise. Accordingly, on April 30, 2013,

the hearing judge entered a default order against Respondent and the matter was set for a

hearing on May 29, 2013. Respondent, though notified of the default order and hearing date,

neither moved to vacate the order nor appeared at the hearing.

       During the May 29 hearing, the hearing judge received evidence from the

Commission, acting through Bar Counsel. Shortly thereafter, the hearing judge issued

       3
        (...continued)
       610 b 1 (D), or (B) enter into an agreement with the financial institution to
       have any fees or charges deducted from an operating account maintained by
       the attorney or law firm. The attorney or law firm may deposit into an attorney
       trust account any funds expected to be advanced on behalf of a client and
       expected to be reimbursed to the attorney by the client.

              2. An attorney or law firm may deposit into an attorney trust account
       funds belonging in part to a client and in part presently or potentially to the
       attorney or law firm. The portion belonging to the attorney or law firm shall
       be withdrawn promptly when the attorney or law firm becomes entitled to the
       funds, but any portion disputed by the client shall remain in the account until
       the dispute is resolved.

              3. Funds of a client or beneficial owner may be pooled and
       commingled in an attorney trust account with the funds held for other clients
       or beneficial owners.

                                             -2-
written findings of fact and conclusions of law, in which he concluded that Respondent had

violated MLRPC 1.15(b), MLRPC 8.4(c) and (d), and Maryland Rule 16-607.

       On February 11, 2014, we held oral argument, at which only the Commission, acting

through Bar Counsel, appeared. The next day, we entered a per curiam order disbarring

Respondent. We shall explain in this opinion the reasons for Respondent’s disbarment.

                                            I.

       Based upon the evidence he accepted at the May 29, 2013, hearing, the hearing judge

set forth the following findings of fact:

       Respondent has been a member of the Bar of this Court since 1973. He served as

general counsel for his father’s company, Crown Service, Inc. (“Crown Service”), and also

maintained a separate practice.4

       When Respondent’s father passed away in 2004, he and his brother assumed

ownership of Crown Service. From 2004 until 2010, the two brothers were in charge of the

company’s day-to-day operations.

       In 2010, Respondent and his brother entered into an agreement by which Respondent

assigned to his brother his ownership interest in Crown Service and, in return, his brother

promised to pay the company’s outstanding tax liability, which, at the time, included over

$70,000 in federal taxes. Respondent understood that, notwithstanding the agreement, he

       4
        According to the “final report” issued by the Commission investigator assigned to
Respondent’s case, Respondent practiced at several law firms from 1974 to 1985 and
maintained his own practice after that time.

                                            -3-
remained personally liable for the company’s tax liability, and the IRS could therefore

garnish his personal funds in order to satisfy that liability.

       At some point in 2010, Respondent resumed the private practice of law. Around that

time, he opened an attorney escrow account at PNC Bank (“PNC”). Respondent did not hold

client funds in his escrow account. Rather, he deposited personal funds into the account in

order to shield those funds from garnishment by the IRS. It was Respondent’s practice to

withdraw funds from a personal checking account, deposit those funds into the attorney

escrow account, and withdraw funds from the escrow account when he needed to pay bills.

       Respondent’s practice of concealing personal funds in his attorney escrow account

eventually came to light in January 2011, shortly after PNC notified the Commission that

Respondent’s escrow account had been overdrawn. In response to the notification from

PNC, Bar Counsel wrote to Respondent requesting an explanation for the overdraft and

demanding records related to the escrow account.            In his response to Bar Counsel,

Respondent claimed that the overdraft was the result of “a mathematical error on [his] part.”

He then described the nature of his agreement with his brother regarding Crown Service’s

tax liability, acknowledged that the agreement had left him “personally vulnerable to [the]

IRS,” and conceded that he had “place[d] personal funds in [his] Attorney Escrow Account

in case [his] personal accounts were levied upon” by the IRS.5

       5
         The hearing judge did not make factual findings specifically addressing Bar
Counsel’s letter to Respondent concerning the overdraft and Respondent’s written response
                                                                           (continued...)

                                               -4-
      Based upon those factual findings, the hearing judge concluded, by a clear and

convincing evidence standard of proof, that Respondent violated MLRPC 1.15(b), MLRPC

8.4 (c) and (d), and Maryland Rule 16-607.        The hearing judge explained his legal

conclusions, as follows:

             By depositing his own funds in his attorney escrow account,
      Respondent violated Rule 1.15(b) of the Maryland Rules of Professional
      Conduct and Maryland Rule 16-607. Those Rules only permit a lawyer to
      deposit personal funds in an escrow account to pay bank-imposed charges or
      maintain a required minimum balance or to hold funds to which the lawyer and
      client may both have a claim. . . . Respondent’s purpose in depositing his own
      funds in his escrow account was to conceal the funds from the Internal
      Revenue Service to avoid garnishment.

             Because Respondent’s purpose for holding the funds in escrow was to
      conceal the funds from his creditor, Respondent’s actions were dishonest and
      constituted conduct prejudicial to the administration of justice in violation of
      Rules 8.4(c) and (d) of the Maryland Rules of Professional Conduct. See
      Attorney Grievance Comm’n v. Foltz, 411 Md. 359, 983 A.2d 434 (2009);
      Attorney Grievance Comm’n v. Powell, 369 Md. 462, 800 A.2d 782 (2002);
      Attorney Grievance Comm’n v. Snyder, 368 Md. 242, 793 A.2d 515 (2002);
      Attorney Grievance Comm’n v. Webster, 348 Md. 662, 705 A.2d 1135 (1998);
      Attorney Grievance Comm’n v. Velazquez, 301 Md. 450, 483 A.2d 354 (1984).

             In summary, the Court finds that Respondent violated Rules 1.15(b) and
      8.4(c) and (d) of the Maryland Rules of Professional Conduct and Maryland
      Rule 16-607 by depositing personal funds in his escrow account to conceal
      those funds from the Internal Revenue Service, knowing that he had a
      substantial tax liability which could result in the garnishment of his personal
      accounts.

      5
         (...continued)
to that letter. The hearing judge, however, did accept copies of both documents at the May
29, 2013, hearing, and his findings of fact are consistent with the contents of those
documents.

                                            -5-
                                             II.

       “In attorney discipline proceedings, this Court has original and complete jurisdiction

and conducts an independent review of the record.” Attorney Grievance Comm’n v. Page,

430 Md. 602, 626 (2013) (citation omitted). “[W]e accept the hearing judge’s findings of

fact as prima facie correct unless shown to be clearly erroneous.” Attorney Grievance

Comm’n v. Lara, 418 Md. 355, 364 (2011) (citation omitted). If no exceptions are filed, we

may treat the findings of fact as established for the purpose of determining the appropriate

sanction. Md. Rule 16-759(b)(2)(A). We review de novo the hearing judge’s conclusions

of law. Md. Rule 16-759(b)(1). This is true even if, as in this case, a default order was

entered against the respondent by the hearing judge. See Attorney Grievance Comm’n v.

Tinsky, 377 Md. 646, 653 (2003).

       Neither Respondent nor Bar Counsel filed exceptions to the hearing judge’s findings

of fact. We therefore treat those findings as established for the purpose of determining the

appropriate sanction.   See Md. Rule 16-759(b)(2)(A).        Likewise, neither party filed

exceptions to the hearing judge’s conclusions of law. Based upon our de novo review of the

record in this case, we agree with the hearing judge, for the reasons stated in his written

conclusions of law, that Respondent violated MLRPC 1.15(b), MLRPC 8.4 (c) and (d), and

Maryland Rule 16-607.      Consequently, our only remaining task is to determine the

appropriate sanction for Respondent’s misconduct.

       Respondent did not appear at oral argument before this Court, nor did he submit a

                                             -6-
recommendation for sanction. Bar Counsel, for his part, recommends disbarment. Bar

Counsel contends that, absent “sufficient mitigating circumstances,” which the hearing judge

did not find were present in this case, the appropriate sanction for dishonest and fraudulent

conduct, such as knowingly concealing personal assets in an attorney escrow account, is

disbarment.

       In determining the appropriate sanction for an attorney’s misconduct, we evaluate the

particular facts and circumstances of each case.       See Attorney Grievance Comm’n v.

Coppola, 419 Md. 370, 404 (2011). “The severity of the sanction depends on . . . the intent

with which the acts [of misconduct] were committed, the gravity, nature and effect of the

violations, and any mitigating factors.” Attorney Grievance Comm'n v. Ward, 394 Md. 1, 33

(2006) (citations omitted). As we consider the appropriate sanction, we bear in mind that the

purpose of a sanction is not to punish the attorney, Attorney Grievance Comm’n v. Garcia,

410 Md. 507, 521 (2009), but rather, “to protect the public and the public’s confidence in the

legal profession.” Attorney Grievance Comm’n v. Zimmerman, 428 Md. 119, 144 (2012).

“Sanctions accomplish these goals by deterring intolerable conduct and keeping those unfit

to practice law from doing so.” Id.

       The gravamen of Respondent’s misconduct is his dishonest and fraudulent practice

of depositing personal funds into an attorney escrow account in order to shield those funds

from creditors—namely the IRS. We have said before, and it bears repeating here, that

“[c]andor and truthfulness are two of the most important moral character traits of a lawyer.”

                                             -7-
Attorney Grievance Comm’n v. Myers, 333 Md. 440, 449 (1994). “Unlike matters relating

to competency, diligence and the like, intentional dishonest conduct is closely entwined with

the most important matters of basic character to such a degree as to make intentional

dishonest conduct by a lawyer almost beyond excuse.” Garcia, 410 Md. at 521-22 (quoting

Attorney Grievance v. Vanderlinde, 364 Md. 376, 418 (2001)). Thus, “[w]hen an attorney’s

conduct involves intentional dishonesty, fraud, deceit or misrepresentation, we do not discuss

‘degrees’ of dishonesty, but generally order disbarment, absent compelling extenuating

circumstances.” Id. at 521 (citation omitted). To the extent an attorney alleges that such

circumstances exist, the bar for avoiding disbarment remains high:

       [W]e will not accept as compelling extenuating circumstances anything less
       than the most serious and utterly debilitating mental or physical health
       conditions, arising from any source that is the root cause of the misconduct
       and that also result in an attorney’s utter inability to conform his or her
       conduct in accordance with the law and with the [MLRPC].

Attorney Grievance Comm’n v. Powell, 369 Md. 462, 475 (2002) (quotation omitted).

       In the present case, Respondent knew that Crown Service, the company he and his

brother had owned and operated for approximately six years, owed over $70,000 in federal

taxes. Respondent also knew that, notwithstanding his brother’s commitment to pay the

company’s outstanding tax liability, he remained personally liable to the IRS for the

company’s unpaid taxes. Respondent conceded in a letter to Bar Counsel before the

commencement of this action, and the hearing judge found as a fact, that Respondent’s

purpose in transferring funds from his personal checking account to his attorney escrow

                                             -8-
account was to conceal from the IRS money that he knew was subject to garnishment.

       Similar violations have warranted disbarment by this Court in the past. Indeed, our

cases firmly establish that the act of intentionally “thwart[ing] collection efforts by

creditors,” in violation of MLRPC 8.4(c) and (d), is grounds for disbarment. See Attorney

Grievance Comm’n v. Foltz, 411 Md. 359, 413 (2009). In Foltz, we disbarred an attorney

who used his attorney escrow account to “hide loan monies, funds from his property

management business, and other personal funds” from a creditor. Id. at 414. In Powell, we

disbarred an attorney who used a trust account and an account belonging to his deceased

father “for personal and business expenses, thereby misrepresenting the character and

ownership of these accounts in order to avoid the claims of creditors.” See 369 Md. at 469,

475-76. In Attorney Grievance Comm’n v. Snyder, 368 Md. 242 (2002), we disbarred an

attorney who used an attorney escrow account “as a repository for the personal assets he

sought to conceal from his creditors during the pendency of his involuntary bankruptcy.” Id.

at 260, 276. In light of these cases, it cannot be doubted that, absent compelling extenuating

circumstances, Respondent’s misconduct compels the same disposition:            disbarment.

Respondent presented no such circumstances.

       All of the above, taken together, led us to conclude that disbarment is the appropriate

sanction for Respondent’s misconduct. Accordingly, we entered the February 12, 2014, per

curiam order disbarring Respondent and awarding costs against him.

                                             -9-