Disciplinary Bd. of the Supreme Court v. Hoffman (In re Hoffman)

• Citation: 2013 ND 137,834 N.W.2d 636
• Decision Date: 23 July 2013
• Docket Number: No. 20120290.,20120290.
• Parties: In the Matter of the Application for DISCIPLINARY ACTION AGAINST Michael R. HOFFMAN, a Member of the Bar of the State of North Dakota. Disciplinary Board of the Supreme Court, Petitioner v. Michael R. Hoffman, Respondent.
• Court: United States State Supreme Court of North Dakota

834 N.W.2d 636

2013 ND 137

In the Matter of the Application for DISCIPLINARY ACTION AGAINST Michael R. HOFFMAN, a Member of the Bar of the State of North Dakota.

Disciplinary Board of the Supreme Court, Petitioner

v.Michael R. Hoffman, Respondent.

No. 20120290.

Supreme Court of North Dakota.

July 23, 2013.

Paul W. Jacobson, Disciplinary Counsel, Bismarck, N.D., for petitioner.

Nancy Hollander (argued), Freedman Boyd Hollander Goldeberg Urias & Ward, P.A., Albuquerque, N.M.; and Thomas A. Dickson (appeared), Bismarck, N.D., for respondent.

PER CURIAM.

[¶ 1] Attorney Michael R. Hoffman objects to a report of a Hearing Panel of the Disciplinary Board of the Supreme Court, recommending that he be reprimanded, that he refund $25,460 with interest to Bradford Wetmore, a former client, and that he pay the costs of the disciplinary proceeding. We conclude Hoffman did not violate N.D.R. Prof. Conduct 1.5(a) or 1.15(a) and (c) in his “minimum fee” agreement with Wetmore to provide legal services. However, we conclude a “minimum fee,” even designated as nonrefundable, may still be subject to refund under N.D.R. Prof. Conduct 1.16(e) upon termination of the attorney-client relationship. We therefore conclude Hoffman violated N.D.R. Prof. Conduct 1.16(e) in failing to refund any amount to Wetmore. We decline to adopt the Hearing Panel's recommendation for discipline, but instead order that Hoffman refund $25,460 to Bradford Wetmore, with interest at the legal rate from September 22, 2010. We further order that Hoffman pay partial costs and expenses of the disciplinary proceeding in the amount of $2,400.

I

[¶ 2] In July 2010, Wetmore retained Hoffman to represent him in a criminal matter involving several felony charges, and the two executed a written contract for legal services. The agreement provided that in exchange for a “minimum fee” of $30,000, Hoffman would defend the charges to dismissal, sentence or deferred imposition of sentence, including a jury trial if necessary. The agreement also stated “[t]here is no refund of the minimum fee.” Wetmore paid Hoffman $30,000 and an additional $1,000 for an advance payment of expenses, as required in the contract. Hoffman placed the $30,000 in his operating account.

[¶ 3] According to the evidence at the hearing, Hoffman had conferences with Wetmore on July 16, August 4, and August 27, 2010; he wrote the prosecuting attorney a letter on August 27, 2010, and received a fax from Wetmore on September 8, 2010; he began preparing for a preliminary hearing on September 16, 2010; he appeared at a 45–minute preliminary hearing in the case on September 21, 2010; he had a two-hour meeting with Wetmore after the preliminary hearing; and Wetmore terminated his employment on September 22, 2010. After terminating Hoffman's employment, Wetmore asked him to return the “unearned portion” of the $30,000 payment, but Hoffman refused.

[¶ 4] In August 2011, Disciplinary Counsel petitioned for discipline against Hoffman regarding his employment contract with Wetmore, alleging violations of N.D.R. Prof. Conduct 1.5(a), Fees; N.D.R. Prof. Conduct 1.15(a) and (c), Safekeeping Property; and N.D.R. Prof. Conduct 1.16(e), Declining or Terminating Representation. Hoffman denied the allegations. A Hearing Panel heard the case and found that Hoffman represented Wetmore for approximately two and one-half months, expended 25.8 hours on the case, and was also working on other cases during this time. The Hearing Panel concluded that Hoffman violated the rules as charged and recommended that he receive a reprimand, return $25,460 to Wetmore, and pay the costs of the disciplinary proceeding.Hoffman objected to the Hearing Panel's recommendations.

II

[¶ 5] We have summarized our standard for reviewing disciplinary proceedings:

We review disciplinary proceedings de novo on the record. Disciplinary counsel must prove each alleged violation by clear and convincing evidence, which means the trier of fact must be reasonably satisfied with the facts the evidence tends to prove and thus be led to a firm belief or conviction. We give the Disciplinary Board's findings, conclusions, and recommendations due weight, but we do not act as a mere rubber stamp. We consider each disciplinary matter on its own facts to decide which sanction, if any, is appropriate.

In re Disciplinary Action Against Hann, 2012 ND 160, ¶ 14, 819 N.W.2d 498 (citations and quotations omitted).

III

[¶ 6] Hoffman raises three issues in response to the Hearing Panel's recommendations. He argues that his $30,000 non-refundable minimum fee was reasonable under N.D.R. Prof. Conduct 1.5(a) and earned under N.D.R. Prof. Conduct 1.16(e); that as a non-refundable retainer, he properly placed the $30,000 in his operating account; and that his due process rights are violated by the Hearing Panel's reliance on New York law and ex post facto or retroactive application of In the Matter of Cooperman, 83 N.Y.2d 465, 611 N.Y.S.2d 465, 633 N.E.2d 1069 (1994) (holding special nonrefundable retainer fee agreements are against public policy and transgressing the Code of Professional Responsibility).

[¶ 7] The Hearing Panel concluded that Wetmore was obligated to pay a $30,000 “minimum fee” for Hoffman's representation through “dismissal, or sentence or deferred imposition of sentence, including jury trial,” under the employment agreement's terms, but that Hoffman's employment was terminated before any of the agreement's specified events. Although the agreement stated there was no refund of the “minimum fee” and Hoffman refused to return any of the $30,000, the Panel cited N.D.R. Prof. Conduct 1.16, cmt. 5, and explained that a client has the right to discharge a lawyer at any time, with or without cause, subject to liability for payment for the lawyer's services. The Hearing Panel concluded that a reasonable fee in this case would be one which compensated Hoffman for the work he had done but would not impose a hurdle or barrier to Wetmore's right to discharge his attorney, and that Hoffman only was required to incur approximately 25.8 hours of work over a two and one-half month period during which he worked for other clients.

[¶ 8] The Hearing Panel found that the “diversity” of the fee agreements in North Dakota countervails the Rule 1.5 consideration of the fee charged in the locality for similar legal services. The Hearing Panel concluded that $4,540, rather than $30,000, was a reasonable fee for Hoffman's work under N.D.R. Prof. Conduct 1.5(a)(1). The Hearing Panel found that Hoffman's admission that he placed the $30,000 in his operating account showed a violation of N.D.R. Prof. Conduct 1.15 and that Hoffman violated Rule 1.16(e) when he failed to refund any “advance payment of the fee” that was not earned. The Hearing Panel essentially treated the $30,000 payment as a type of unearned advance payment, to have been deposited in Hoffman's trust account, rather than a general retainer or fully-earned flat fee. The Hearing Panel found clear and convincing evidence that Hoffman violated N.D.R. Prof. Conduct 1.5, 1.15, and 1.16.

A

[¶ 9] Hoffman argues that his $30,000 nonrefundable “minimum fee” was both reasonable under N.D.R. Prof. Conduct 1.5(a) and earned under N.D.R. Prof. Conduct 1.16(e), as consistent with decisions from other jurisdictions holding nonrefundable minimum fees are ethically permissible. See Grievance Adm'r, Attorney Grievance Comm'n v. Cooper, 757 N.W.2d 867 (Mich.2008); Ariz. State Bar Ethics Op. 10–03 (2010); Ky. Bar Ass'n Ethics Op. E–380 (1995); Utah State Bar Ethics Advisory Comm. Op. No. 136 (1993). Hoffman contends his written fee agreement and his verbal explanation of the agreement to Wetmore were unambiguous and did not violate either Rule 1.5(a) or Rule 1.16(e). Hoffman asserts that he has practiced law in North Dakota since 1987, knew the fees customarily charged in North Dakota criminal cases, including nonrefundable fees, and that notable defense attorneys in North Dakota have charged nonrefundable flat or minimum fees. Hoffman submitted documentary evidence of other similar agreements. Hoffman testified that his $30,000 fee was within the fees customarily charged in North Dakota and was reasonable, and his expert testified it was reasonable and perhaps a little low.

[¶ 10] Hoffman also contends he was justified in taking into account the reason Wetmore was possibly switching lawyers, maintaining he took over this serious case from another attorney and was suspicious Wetmore was only changing lawyers to obtain a continuance. Hoffman claims he made it clear to Wetmore the minimum fee was nonrefundable and he wanted to be compensated for his availability, the time and responsibility invested, and the risk he assumed. Hoffman argues he properly placed the $30,000 in his operating account rather than his trust account because a nonrefundable fee becomes the property of the lawyer when paid, and such funds should not be placed in a trust account. He relies on his expert's testimony that the $30,000 nonrefundable fee properly went into his operating account. Hoffman contends his due process rights are violated by the Hearing Panel's reliance on In the Matter of Cooperman, 611 N.Y.S.2d 465, 633 N.E.2d 1069, and applying the case to him retroactively or ex post facto.

B

[¶ 11] Our Rules of Professional Conduct require an attorney's fee to be reasonable and require the basis, rate, or fee amount to be adequately communicated to the client within a reasonable time after commencing representation. N.D.R. Prof. Conduct 1.5(a) and (b); see In re Disciplinary Action Against Hellerud, 2006 ND 105, ¶ 9, 714 N.W.2d 38. “Violating the Professional Conduct Rules can subject an attorney to discipline.” Hellerud, at ¶ 9.Rule 1.5(a), N.D.R. Prof. Conduct, states that “[a] lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses,” and lists eight factors to be considered in deciding...