Attorney Grievance Comm'n of Maryland v. Pennington

• Decision Date: 28 July 1999
• Docket Number: Misc. AG No. 13
• Citation: 355 Md. 61,733 A.2d 1029
• Parties: ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Jill Johnson PENNINGTON.
• Court: Maryland Court of Appeals

733 A.2d 1029

355 Md. 61

ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Jill Johnson PENNINGTON.

Misc. AG No. 13, Sept. Term, 1997.

Court of Appeals of Maryland.

July 28, 1999.

Melvin Hirshman, Bar Counsel, and Kendall R. Calhoun, Asst. Bar Counsel, for Atty. Grievance Com'n of Maryland.

N. Frank Wiggins, Washington, DC, for Respondent.

Argued before BELL, C.J., and ELDRIDGE, RODOWSKY, CHASANOW, RAKER, WILNER and CATHELL, JJ.

BELL, Chief Judge.

I.

The Attorney Grievance Commission of Maryland (the "Commission"), by Bar Counsel, acting pursuant to Maryland Rule 16-709, filed a Petition for Disciplinary Action against Jill Johnson Pennington (the "Respondent"), alleging that she did engage in misconduct. In the Petition, the respondent was charged with violating Rules 1.5,¹ 1.8² and 8.4,³ of the Maryland Rules of Professional Conduct. The Petition was referred, pursuant to Maryland Rule 16-711(a),⁴ to the Hon. William B. Spellbring, of the Circuit Court for Prince George's County, for hearing and to make findings of fact and conclusions of law.

a.

Following a hearing, the filing of post-trial briefs, and reargument, the hearing court, as required, determined the facts, as follows:

"The respondent ... is a lawyer, having graduated from the University of Minnesota Law School in June of 1981 and initially becoming a member of the bar of the District of Columbia before her admission to the bar of the Court of Appeals ... on June 9, 1989.

* * * *

"Ms. Jeter felt that her employer ⁵had discriminated against her for failing to move her from a sales position to a management position. On October 10, 1992, Ms. Jeter and Ms. Pennington executed a retainer agreement....

"In that retainer agreement, Ms. Pennington became the attorney for Ms. Jeter for any and all employment discrimination claims by Ms. Jeter against Foot Locker. Prior to retaining Ms. Pennington, Ms. Jeter had consulted with another attorney but did not retain that attorney because of the retainer fee which the attorney requested and which Ms. Jeter was unable to pay.

"On October 16, 1992, Ms. Pennington wrote a check in the amount of $1,000.... That check was payable to Anita Jeter and was a loan to Ms. Jeter. The check was cashed by Ms. Jeter and the proceeds were used for her own personal use, other than for litigation expenses.

"In December of 1992, Ms. Pennington filed suit on behalf of Ms. Jeter against Foot Locker. On April 30, 1993, Ms. Pennington wrote a check in the amount of $350....

"This April 30 th check was also made payable to Anita Jeter and was a second loan. Ms. Jeter also cashed this $350 check and used the proceeds for her own personal use, other than litigation expenses. There was no agreement made at the time of either loan as to when or how those loans were to be repaid to Ms. Pennington by Ms. Jeter.

"Although Ms. Jeter sought compensation for the discrimination by her employer, her principal objective with that employer was to move from a sales position to a management position. In March of 1994, she was given a Kid Foot Locker store to manage. On June 15, 1994, while appearing before the magistrate judge in the United States District Court for Maryland, Ms. Pennington and counsel for Foot Locker reached an agreement to settle the lawsuit and that agreement was approved by and acceptable to Ms. Jeter.

"The settlement consisted of a payment of $25,000 by Foot Locker to resolve the lawsuit. A statement of settlement dated July 23, 1994, identifying the disbursement of the $25,000 was signed and received by Ms. Jeter....

"Ms. Jeter received a check in the amount of $5318.83 as the proceeds due her from the settlement. Ms. Pennington received an attorney fee of $15,000 from the settlement, the remainder of the settlement proceeds paid expenses and the personal loans to Ms. Jeter from Ms. Pennington. Ms. Pennington recorded 144.4 hours consisting of consultation with her client, the drafting of pleadings, discovery proceedings and court proceedings in her representation of Ms. Jeter.

"Subsequent to the settlement disbursement Ms. Jeter returned to Ms. Pennington's office on her own initiative because she felt she owed more money to Ms. Pennington. Ms. Pennington never inquired or never knew whether or not Ms. Jeter's household income equaled or exceeded $40,000.

"The retainer agreement executed between Ms. Pennington and Ms. Jeter on October 10, 1992, is a form document containing Ms. Pennington's handwriting in order to make the document specific to Ms. Jeter's claim. The document identifies Ms. Pennington's representation of Ms. Jeter in the following language: To represent and procure on behalf of the undersigned client any and all claims arising as a result of employment discrimination suffered by the client at Foot Locker and kid's Foot Locker from January 30, 1990, to the present.

"The document identifies Ms. Pennington's compensation as one-third of all sums recovered before suit is filed and 40 percent of all sums recovered if suit is filed and after suit is filed and also a payment of $5,000 at such time as the client's household income becomes not less than $40,000 per year. This $5,000 fee will be waived if the recovery is at least $60,000.

"The client is responsible for the identified expenses. No money is advanced towards those expenses, if Ms. Jeter discontinued the relationship with Ms. Pennington, the document states that Ms. Jeter will be responsible for Ms. Pennington's time billed at $100 an hour and for the time of law clerks, paralegals and or legal [assistants'] time billed at $50 an hour. This document was explained to Ms. Jeter by Ms. Pennington.

"Testifying as a character witness for Ms. Pennington was Mr. James H. Taylor, who is well-known and well-respected by this member of the court. Ms. Pennington had formerly been employed by Mr. Taylor. Mr. Taylor attested to Ms. Pennington's professional honesty and integrity."

b.

The hearing court concluded that the respondent violated Rules 1.5(a) and 1.8(e). It rejected the petitioner's arguments that she also violated Rules 1.5(c) and 8.4(d). With respect to the Rule 1.5(a) violation, the hearing court found the "fee [to be] a combination fixed and contingent fee," that it was reasonable when agreed upon, because "both, the result and the means to the result [were] unknown," and that "the movement of the percentage of the attorney's compensation from one-third to two-fifths with the filing of a lawsuit" was appropriate. It determined, on the other hand, that the fee taken was not reasonable. The court explained:

"I base this finding, not only on the fact that the fee represents 60 percent of the settlement figure, but also on the fact that the respondent's hourly charge is in excess of the $100 per hour [charge] identified in the retainer agreement.

"The attorney's hourly rate is typed in at $200 per hour, but that figure is lined through and $100 is substituted in writing.

"The Court of Appeals in Attorney Grievance Commission v. Korotki, 318 Md. [646, 569 A.2d 1224] (1990) at Page [665] states, `[i]n seeking the increase, Korotki also crossed the fifty percent line and acquired a greater interest in the outcome of the litigation than his clients. Without passing on whether there can ever be circumstances justifying a contingent fee in excess of fifty percent it is generally a violation of the rule for the attorney's stake in the result to exceed the client's stake.'

"Nothing has been presented to this court which would justify that line being crossed in this case."

With respect to the Rule 1.8(e) violation, the hearing court reasoned:

"Based on the findings of fact that I have previously made, specifically, when the loans were made and when the attorney/client relationship began and based upon the authority of the Attorney Grievance Commission of Maryland, versus Eisenstein, 333 Md. 464, 625 [635] A.2d 1327 (1994), I find that the respondent has, in fact, violated rule 1.8(e)."

Only the respondent has taken exceptions to the hearing court's findings of fact and conclusions of law that she violated Rules 1.5(a) and 1.8(e), arguing that "[e]ach of those two findings was wrong and the charges should be dismissed." The exception to the Rule 1.5(a) violation is premised on the distinction between the Korotki case and the case sub judice, the former being entirely contingent and the latter, mixed, both contingent and fixed. She submits that the Korotki rule can never apply when the fee is mixed, pointing out that "[w]hen a fee arrangement diverges from the purely contingent to either a fixed or a mixed arrangement that has both a fixed and a contingent element, the parties can never know when they bargain for the fee whether the lawyer's share of proceeds will be more or less than 50 percent." She also notes that this case differs from Korotki, in that, she abided by the terms of the fee agreement. Finally, the respondent maintains that, judged by the applicable factors of Rule 1.5(a), the fee that the parties agreed upon was reasonable.

The respondent acknowledges that the hearing court applied, as it was required to do, this Court's holding in Eisenstein in finding the Rule 1.8(e) violation. Nevertheless, she asserts, that case was wrongly decided and thus merits our reconsideration and re-interpretation.

II.

a.

In Korotki, this court suspended a lawyer from the practice of law for eighteen months for charging an excessive fee. In so doing, we characterized the case as "a particularly aggravated case of greed overriding professionalism." Attorney Grievance Com'n of Maryland v. Korotki, 318 Md. 646, 649, 569 A.2d 1224, 1226 (1990). Korotki was charged with a violation of the predecessor of Rule 1.5(a), DR 2-106(B), and DR 5-103(A), which, while permitting an attorney to acquire a lien and to enter into a contingent fee arrangement, prohibited the attorney from acquiring a proprietary interest in the litigation.⁶ Initially, the fee...