Attorney Grievance Comm'n of Md. v. Sperling

• Citation: 459 Md. 194,185 A.3d 76
• Decision Date: 21 May 2018
• Docket Number: No. 40, 76 Sept. Term, 2016,40, 76 Sept. Term, 2016
• Parties: ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Samuel SPERLING and Jonathan Daniel Sperling
• Court: Court of Special Appeals of Maryland

459 Md. 194

185 A.3d 76

ATTORNEY GRIEVANCE COMMISSION OF MARYLAND

v.Samuel SPERLING and Jonathan Daniel Sperling

No. 40, 76 Sept. Term, 2016

Court of Appeals of Maryland.

May 21, 2018

ARGUED BY Lydia E. Lawless, Esquire, Bar Counsel, Atty. Grievance Commission of Maryland, FOR PETITIONER.

ARGUED BY Craig S. Brodsky, Esquire (George S. Mahaffey, Jr., Esquire Goodell, DeVries, Leech & Dann, LLP, Baltimore, MD), FOR RESPONDENTS.

ARGUED BEFORE: Barbera, C.J., Greene, Adkins, McDonald, Watts, Hotten, Getty, JJ.

Adkins, J.

In 2016, the Attorney Grievance Commission of Maryland ("AGC"), acting through Bar Counsel, filed a Petition for Disciplinary or Remedial Action ("Petition") against Respondents Samuel Sperling and Jonathan Daniel Sperling.¹ The AGC's investigation began in 2014 after it received notice that The Sperling Law Office, P.C.'s ("Firm") trust account was overdrawn.²

Bar Counsel charged Samuel with violating the Maryland Lawyers' Rules of Professional Conduct³ ("MLRPC") in his capacity as an attorney working at the Sperling Law Office, P.C. ("Firm"). Specifically, Bar Counsel alleged that Samuel violated MLRPC: (1) 1.15(a) and (d) (Safekeeping Property); (2) 5.3(a)–(d) (Responsibilities Regarding Nonlawyer Assistants); (3) 5.4(a) and (d) (Professional Independence of a Lawyer); (4) 5.5(a) (Unauthorized Practice of Law; Multijurisdictional Practice of Law); (5) 8.1(a) and (b) (Bar Admission and Disciplinary Matters); and (6) 8.4(a)–(d) (Misconduct).

Bar Counsel charged Jonathan with violating MLRPC: (1) 1.1 (Competence); (2) 1.2(a) (Scope of Representation and Allocation of Authority Between Client and Lawyer); (3) 1.3 (Diligence); (4) 1.4(a)–(b) (Communication); (5) 1.5(a)–(b) (Fees); (6) 1.16(d) (Declining or Terminating Representation); (7) 5.3(d)(3) (Responsibilities Regarding Nonlawyer Assistants); (8) 8.1(a)–(b) (Bar Admission and Disciplinary Matters); and (9) 8.4(a)–(d) (Misconduct).

We transmitted the matter to the Honorable H. Patrick Stringer ("the hearing judge") of the Circuit Court for Baltimore County to hear the case. Following a five-day hearing, the hearing judge issued Findings of Fact and Conclusions of Law, in which he found by clear and convincing evidence that Samuel violated MLRPC 1.15, 5.3(b) and (d)(3), 5.4(d)(1), and 8.4(a). The hearing judge also concluded that Jonathan violated MLRPC 5.3(d)(2)(G) and (d)(3), 8.1(a), and 8.4(a) and (c), and Maryland Rules 16–760(c)(11), (d)(3), and 16–609(b).⁴

THE HEARING JUDGE'S FINDINGS OF FACT

Samuel was admitted to the Maryland Bar in 1996, and Jonathan was admitted in 1998. Upon admission, both brothers began working as associates at a law firm operated as a sole proprietorship by their father, Leonard Sperling ("Leonard"). In March 2004, the Court of Appeals suspended Leonard from the practice of law.⁵ During his suspension, The Sperling Law Office, P.C. was formed. The Articles of Incorporation identify Samuel as the incorporator, and Samuel and Jonathan as the initial directors. The hearing judge found that there was no evidence that Samuel and Jonathan remained as directors or served as officers of the Firm beyond the initial formation. At the same time, the Firm also established an attorney trust account. Leonard, Samuel, and Jonathan were the only attorneys with signatory authority on the trust account.

Leonard was reinstated in July 2004 and resumed practice at the Firm. The hearing judge found that Leonard was the sole shareholder, and he ran the firm, including "managing the attorney trust account, assigning cases, settling cases, paying bills[,] and handling the payroll."

In July 2013, Jonathan was indefinitely suspended from the practice of law.⁶ He was represented by Robert Hesselbacher, who continued advising Jonathan after his suspension about compliance with the Rules and reinstatement requirements.⁷ Hesselbacher met with Jonathan, Samuel, and Leonard to discuss the limitations on Jonathan's activities as a suspended attorney. On July 10, 2013, the Firm employed Jonathan as a paralegal.

In September 2013, Leonard was indefinitely suspended from the practice of law.⁸ His suspension became effective in October 2013. At that time, there were three licensed attorneys working at the Firm: Samuel, Andrea Babest, and Michele Loewenthal. Leonard continued to work at the Firm following his suspension. In April 2014, Jonathan filed a Petition for Reinstatement, which Bar Counsel opposed. The Court of Appeals denied Jonathan's reinstatement in July 2014.

In April and May 2014, Bar Counsel received notices stating that the Firm's trust account was overdrawn. Samuel retained an experienced ethics attorney, Michael McCabe, to assist him in responding to Bar Counsel's inquiries. McCabe advised him to start a new law firm or take over the Firm. On June 6, 2014, Samuel created The Sperling Firm, LLC ("the LLC"), where he currently practices, and is the sole member.

On July 31, 2014, Bar Counsel filed a Complaint for a Temporary Restraining Order, Preliminary, and Permanent Injunction in the Circuit Court for Baltimore County requesting that Leonard and Jonathan no longer be associated with the Firm, prohibiting withdrawals or transfers from the Firm's accounts, and ending operation of the Firm. The Circuit Court issued a Consent Order prohibiting the Firm from operating, and appointing Edward Gilliss, Esq., as interim receiver.

Gilliss's primary duties were to identify active files and ensure that an attorney was available to represent the clients, and to identify closed cases in which clients had not been paid. Gilliss met with Samuel, Leonard, and Jonathan regarding matters at the Firm. Samuel and Jonathan assisted Gilliss—Samuel identified active clients, and Jonathan identified closed matters wherein clients or other expenses had not been paid. Gilliss sent active clients a letter notifying them that they could elect Samuel or Babest to represent them or choose another attorney. Samuel, Babest, and Gilliss agreed to a split of attorneys' fees. Gilliss received 25% of the "legal fee that was generated from resolution of those active files," and successor counsel received 75%.

Gilliss discovered that Leonard had misappropriated a significant amount of money from the trust account and settled claims, but had not paid medical expenses, other lien holders, or the clients. With no money available in the trust account to pay these obligations, Gilliss referred clients to the Client Protection Fund.

On August 26, 2014, the Court of Appeals issued an Order disbarring Leonard for multiple violations of the MLRPC, including misappropriation.⁹ The hearing judge found that there was no evidence that Samuel or Jonathan misappropriated funds, or that they knew that their father was doing so.

The Attorney Trust Account

In 2004, the Firm implemented a system that was in effect through July 31, 2014. The Firm kept a register in which entries were made when a check was written. The "date, check amount, activity, reason for the disbursement (whether a settlement or fee) and client's name would be recorded." Samuel entered all the checks he wrote in the register.

After Jonathan and Leonard were suspended, both remained signatories on the trust account, and continued writing checks. Leonard, Jonathan, and Samuel all wrote checks on the account during the relevant period. While Leonard wrote most of the checks, Jonathan wrote 86 checks, either payable to cash, or to the Firm. Jonathan explained that Leonard told him to "write the checks from the escrow account and deposit the money in the operating account as payment of fees earned by the firm." This was to "avoid delay of the transfer of the funds from the attorney trust account to the operating account." Jonathan did not keep any of the money.

Samuel testified that he did not know that Leonard and Jonathan were writing checks until June 2014. Relying on the parties' stipulations, the hearing judge concluded that Samuel's testimony regarding when he had knowledge of Leonard writing checks was not accurate. The records showed that during his suspension, Leonard wrote nine checks payable to Samuel, which were drawn on the escrow account. Samuel stipulated to endorsing three of those checks.

Samuel deposited client funds in the trust account from July 2013 until the TRO was entered. He represented "at least three ... clients whose cases he settled and deposited their money in the trust account, but the money was not disbursed to the client[ ]" because it was part of those funds Leonard misappropriated. As a result, Gilliss directed them to the Client Protection Fund.

From July 2013 until May 2014, Samuel did not "review bank records to determine what funds were being deposited or disbursed from the account, ... perform monthly reconciliations of the trust account," or restrict Leonard or Jonathan's access to the trust account. Samuel did not take any action to remove Leonard or Jonathan as signatories. He told Leonard and Jonathan to consult with Hesselbacher regarding actions they could or could not take as suspended attorneys.

The hearing judge concluded that based on the number of checks that Leonard and Jonathan wrote, "Samuel should have known Jonathan and Leonard were writing checks on the trust account." Even if Samuel did not know who was writing the checks, he "should have known, or at least suspected that Leonard and Jonathan were writing checks on the trust account and inquired where the checks were." After he learned that the trust account was overdrawn, Samuel "finally confronted his father and told him and Jonathan they could not write escrow checks." But Leonard and Jonathan continued writing checks through July 2014.

Jonathan's 5.3 Agreement

In November 2013, Hesselbacher, acting on Jonathan's behalf, sent Bar Counsel a draft Md. Rule 16–760 affidavit, and a Md. Rule 16–781(d) statement for review. The 16–781(d) statement explained Jonathan's employment status at the Firm, and that Leonard and Samuel had supervised...