Attorney Grievance v. Hess

• Decision Date: 14 January 1999
• Docket Number: Misc. Docket AG, No. 55
• Citation: 352 Md. 438,722 A.2d 905
• Parties: ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Stanford Donald HESS.
• Court: Maryland Court of Appeals

722 A.2d 905

352 Md. 438

ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Stanford Donald HESS.

Misc. Docket AG, No. 55, Sept. Term, 1997.

Court of Appeals of Maryland.

January 14, 1999.

Melvin Hirshman, Bar Counsel, for Atty. Grievance Com'n of Maryland.

Andrew J. Graham, Baltimore, for Respondent.

Argued before BELL, C.J., RODOWSKY, CHASANOW, RAKER, WILNER, CATHELL, and ROBERT L. KARWACKI (retired, specially assigned), JJ.

RODOWSKY, Judge.

Between 1985 and 1987 the respondent, Stanford Donald Hess (Hess), while a partner in a major Baltimore law firm, consistently and falsely inflated the hours worked by attorneys at the firm on the matters of a dominant, but difficult, client. At least one purpose of the artificial increase was to offset a fifteen percent discount which the firm had agreed to give to the client for prompt payment which, as Hess anticipated, never materialized. The basic facts are not in dispute. Although each party has filed exceptions, our rulings thereon do not bear materially on the ultimate disposition. What the sanction should be is the principal issue in this matter where Bar Counsel argues for disbarment, and Hess argues for a reprimand.

In its petition for disciplinary action the Attorney Grievance Commission charged Hess with violating the Maryland Lawyers' Rules of Professional Conduct, Rule 8.4(c) (engaging in conduct involving dishonesty, fraud, deceit or misrepresentation) and Rule 1.5 (requiring that fees be reasonable).¹ This Court referred the charges for hearing to Judge Albert J. Matricciani, Jr., of the Circuit Court for Baltimore City. Judge Matricciani found that Hess had violated Rule 8.4(c). Hess does not take exception to that conclusion, but he does except to perceived overstatement or understatement in certain factual findings. Judge Matricciani found no violation of Rule 1.5, to which Bar Counsel excepts.

I

Hess was admitted to the bar of this Court in 1966. He engaged in private practice and later served in the Maryland Attorney General's Office. In 1974, he joined the Baltimore law firm then known as Weinberg & Green (W & G).

Hess's principal client and one of the principal clients of W & G was Malcolm Berman (Berman). His stable of enterprises included a holding company which owned Fairfax Savings and Loan Association (Fairfax) and in which Berman held 77.5% of the stock. Hess's representation of Berman and his ventures involved hundreds of matters over the years. W & G's billings for fees to Berman ranged between approximately $400,000 and as much as $900,000 annually and represented between twenty percent and sixty percent of Hess's total annual billings. In terms of fees billed, Berman was one of W & G's major clients.

In addition to their professional relationship, Hess and Berman were personal friends. Hess, nevertheless, described Berman as an "impossible" client. He regularly failed to pay his legal bills promptly and often paid less than the full amount that was due, although during the relevant period, he never complained about the professional services rendered by W & G. Berman was exceedingly demanding as a client, telephoning Hess at night at his home on the average of six nights a week. Berman even called Hess virtually every day while Hess was on his honeymoon. These telephone conversations initiated by Berman would last between one and two hours. Judge Matricciani found that Berman was never billed for the time expended on these evening telephone conversations. Judge Matricciani characterized the Berman-Hess relationship as "an intense and demanding one in which the client retained control and manipulated the situation to his benefit at all times."

The misconduct in question arose from Berman's request for a fifteen percent discount on his bills. Berman falsely indicated to Hess that he had received a similar discount from another large Baltimore law firm. Hess discussed the request with the chairman of W & G's finance committee and with the firm's managing partner, and the discount was ultimately approved, effective January 1, 1986. This oral agreement between Berman and W & G was conditioned upon Berman's prompt and full payment of his bills.

II

W & G's time records were maintained by electronic data processing, and Berman's enterprises, including Fairfax, usually were billed monthly. Hess was the billing attorney for Berman's accounts with W & G. Early in a given month the time report for the prior month was printed. With respect to Fairfax and other Berman entities that had a number of active matters with W & G during the same period, the attorneys' time was recorded under separate subfiles for each active matter within the particular account. For each subfile the reports showed the date on which services were rendered, the initials of the individual rendering the service, the amount of time expended, expressed in tenths of an hour, that person's hourly rate, and the product of the time multiplied by the rate. We shall call that product "the standard fee." The data processing program also, within each matter or subfile, totaled the standard fees for each person who had worked on the matter during the reporting period.

These monthly data processing reports, which W & G called "pre-bills," contained a summary section in which there were consolidated, matter by matter, the total number of hours worked by all attorneys and the total of standard fees for the respective matters included in the pre-bill for the account. In this summary section of the report, the data processing program added the total of time expended and added the standard fees for all subfiles in the account to produce the sum total of hours and the sum total of standard fees for the client's account for the reporting period. The summary section of the computer-generated report for each account contains a blank space for the manual insertion of a fee, different from the standard fee, for each matter included in the report for the account, together with a blank space for an explanation of the increase or decrease. An upward adjustment of the standard fee on a particular matter might result from the transfer of time, e.g., when an attorney erroneously recorded work as having been done on a different matter from that to which the work actually related. Reductions in the standard fee might result from a determination by the billing attorney or department head that the product of hours times rate produced an inappropriately high fee.

It appears from Bar Counsel's exhibits that pre-bills were not transmitted to clients when their accounts were billed. Rather, the bills that were sent to Berman were typewritten. They contained a description of services, presented by account, by matter, or by attorney, and they contained simply a total of the time devoted to the account or matter by named attorneys.

Hess does not deny that he caused the total hours on billings to Berman's enterprises to be inflated over those contemporaneously recorded by W & G attorneys and reported in the pre-bills.

Against the foregoing background Judge Matricciani made the following findings:

"Despite [Berman's] promise to bring his accounts up to date after the discount agreement had been reached, Mr. Berman continued to be delinquent in his accounts, sometimes neglecting to pay the firm for as long as thirteen months. Nevertheless, at no time did [Hess or W & G] ever terminate the discount agreement or refuse to continue to represent Mr. Berman. Rather, [Hess and W & G] continued their relationship with the client and reaped the benefits of his business. The Court finds that neither [Hess nor W & G] wanted to risk losing Berman or Fairfax as a client and tolerated his behavior accordingly.

"In an attempt to cause the client to pay his bills, [Hess] resorted to what he himself has termed `rough justice,' and in 1985 he began increasing the amounts on several pre-bills by 15%, then discounting those bills by 15%. The net result of this increase-decrease process was to bill Fairfax for slightly less than 100% of the actual services rendered at standard billing rates."

(Record reference and footnote omitted).

We interpret this finding to mean that it was Hess's purpose in inflating the bills to offset the discount for prompt payment.² Hess did not, however, simply mathematically add fifteen percent of the standard fee in order to reach the amount billed. On some of the pre-bills in evidence the increases in time spent over the time recorded by W & G attorneys is written in longhand in the sections of the pre-bill presenting the daily detail, matter by matter, and on other of the pre-bills the increases appear in longhand on the summary of all matters covered by the pre-bill of the account. In two instances the increases appear on a typewritten sheet that is separate from the pre-bill.³ In 1987 W & G represented Fairfax in litigation known as the "Ellerin case," an action by Fairfax against guarantors on a loan. Fairfax's claims included one for attorneys' fees incurred by it in the litigation. When the guarantors sought production of W & G's time records on the matter, Judith O'Neill, a W & G litigator and trial counsel for Fairfax, discovered, prior to Labor Day of 1987, that some of the time data had been altered in billing. She advised James Carbine, the head of W & G's litigation department, who investigated billing of Berman's enterprises back to 1983. Based on that investigation Carbine concluded that the false billing had to be disclosed to Berman and that Berman should be reimbursed for any loss. W & G's executive committee agreed. In addition, W & G abandoned the claim for legal fees in the Ellerin litigation and in another litigation known as the "Zurich matter."

It appears that the artificial increases in the time records became so systematic on Berman matters that, at some point in the life of the scheme, a computer program was devised and used to implement the increases to the...