Disciplinary Proceeding Against Heard, In re, 12272

• Decision Date: 24 September 1998
• Docket Number: No. 12272-5,No. 12272,12272,12272-5
• Court: Washington Supreme Court
• Parties: In re DISCIPLINARY PROCEEDING AGAINST James A. HEARD, Attorney at Law, Bar

Page 405

136 Wn.2d 405

963 P.2d 818

In re DISCIPLINARY PROCEEDING AGAINST James A. HEARD Attorney at Law, Bar No. 12272.

No. 12272-5.

Supreme Court of Washington En Banc.

Argued March 11, 1998.

Decided Sept. 24, 1998.

Washington State Bar Association, Maureen T. Devlin, Randy V. Beitel, Seattle, for Respondent

John L. Farra, Aberdeen, for Petitioner.

TALMADGE, Justice.

In this case we review the Washington State Bar Association (WSBA) Disciplinary Board's (the Board) unanimous recommendation of a two-year suspension of an attorney's license to practice law. The recommendation is based on two principal areas of misconduct--the attorney's mishandling of a client's personal injury settlement and his sexual exploitation of that client.

James Heard negotiated a settlement on behalf of his client during the handling of a personal injury matter. He evaluated the case at more than $150,000, and retained the only cash in the settlement--$50,000 in insurance proceeds. However, much of the settlement's "value" ultimately proved to be illusory. During the process, Heard failed to apprise his client of the problematic quality of the settlement or that he was retaining the only cash in the settlement.

Heard also committed an act of moral turpitude by exploiting his professional relationship with the client to We affirm the Board's determination Heard violated the Rules of Professional Conduct (RPC) in handling the settlement and the Rules of Lawyer Discipline (RLD) by engaging in an act of moral turpitude. We suspend him for two years from the practice of law and order him to pay restitution and costs.

give her alcohol and have sexual relations with her, knowing she had a history of alcohol and drug problems and had sustained severe head injuries in an accident.

ISSUES

1. Does an attorney violate the RPC by negotiating a settlement agreement with worthless interests included, advising his client to sign it, and then keeping all the cash proceeds of the settlement without the client's consent or without rendering the client a final accounting?

2. Does an attorney commit an act of moral turpitude within the meaning of the RLD if he exploits his professional relationship with a vulnerable client by providing her alcohol and having sexual relations with her?

FACTS

In 1989, 23-year-old Katrina Menz was seriously injured in an accident while a passenger on a motorcycle. Menz sustained severe head injuries from the accident, was comatose for a week, and remained in the hospital for several weeks thereafter. Menz's mother retained attorney James A. Heard, then 43-years-old, to represent Menz in her action to recover damages for her injuries. Although Menz's mother signed the retainer agreement, Katrina Menz never did. The retainer agreement provided for a contingent fee paying Heard one-third of all funds collected on Menz's behalf.

Heard sought insurance payments from various insurers. He obtained payment from Menz's insurer, Viking Insurance Company, which paid Menz $25,000 under the under- Heard also filed a lawsuit for Menz against the driver of the motorcycle, Richard McKee. Heard negotiated a settlement with McKee, who was apparently uninsured. In exchange for a release of liability, McKee gave Menz: (1) his 1987 Mazda RX7; (2) a $35,000 unsecured promissory note; and (3) a quitclaim deed for a $50,000 interest he allegedly held in his sister's Seattle home. The settlement agreement asserted a value for the Mazda RX7: "I agree that the value of said automobile shall be Fifteen Thousand Dollars ($15,000)." Ex. 3. The car's actual value was never determined by appraisal or otherwise. Menz took title and possession of the car. Similarly, the promissory note was valued at $35,000, although Menz exchanged it with the Department of Social and Health Services (DSHS) in full satisfaction of a $46,890 past medical payment lien DSHS held against any tort recovery Menz obtained. ¹

insured motorist coverage provision of her automobile liability insurance policy. He obtained a $25,000 settlement from the liability[963 P.2d 821] insurer for the co-owners of the motorcycle, Edward and Virginia Gerrish.

The most problematic of the settlement's features was Prior to the conclusion of the settlement, Heard went to Menz's house and asked her if she would like to discuss the case. Heard knew of Menz's vulnerability, having had access to her medical history. He had successfully secured a guardian ad litem for her in the lawsuit and had instituted a separate guardianship proceeding, which was later dropped. ² He also knew she had prior problems with drug and alcohol abuse. Moreover, he knew she was scheduled for further surgery, a cranio-plasty, in February 1990. Nevertheless Upon negotiation of the settlement, Heard unilaterally decided to keep the $50,000 cash for his fee. He calculated the entire settlement was worth $150,000 by adding together the $50,000 actually recovered from the insurance companies, $15,000 for the alleged value of the Mazda, $35,000 for the alleged value of the promissory note, and $50,000 for the value of the alleged interest in McKee's sister's house. Heard never obtained his client's consent to this arrangement, and never gave her an accounting of the handling of the settlement proceeds.

                McKee's alleged interest in his sister's house.  The settlement agreement explained that McKee had loaned his sister $40,000 and, in return, he was claiming an "untitled interest" in her house worth perhaps $50,000.  Ex. 3.  The agreement, as drafted by Heard, provided a "warranty" by McKee:  "I agree that my interest in said real property is Fifty Thousand Dollars ($50,000.00), although the actual interest of my equity in the property may be less than $50,000.00 but I warrant that it is no less than $40,000."   Ex. 3.  The interest in the house was never appraised.  McKee had no recorded property interest in the house and no security interest.  Heard's office called McKee's sister shortly after the negotiation of the settlement and confirmed McKee's sister alone owned the house and she planned to sell it.  Heard never relayed this information to his client.  McKee's sister sold the house shortly thereafter.  Menz never received a deed reflecting McKee's alleged interest in the house, nor anything of value with respect to McKee's "interest."
                they went to a local lounge to "discuss her case" where they started drinking.  They then decided to visit another local lounge.  Heard told Menz to drive his car despite her protests that she should not drive due to her status as a habitual traffic offender.  After more drinking at a second lounge, they returned to Heard's apartment where they had consensual sexual relations. 3
                

Menz subsequently commenced a malpractice action against Heard, which is currently pending. Upon Menz's complaint, the WSBA filed a formal eight-count disciplinary complaint against Heard for his conduct in representing Menz, alleging he charged Menz a fee contrary to the fee agreement in violation of RPC 1.5(a); never obtained Menz's signature on the retainer agreement in violation of RPC 1.5(c); failed to provide Menz with a written final accounting of the case in violation of RPC 1.5(c)(1); incompetently represented Menz by advising her to sign the McKee settlement agreement without first determining whether the interest existed in violation of RPC 1.1; failed to communicate with Menz and explain matters sufficiently to allow her to make a reasonable choice regarding settlement On December 14 and 15, 1995, a formal disciplinary hearing was held pursuant to RLD 4.10 before a hearing examiner. In a written opinion, the hearing examiner concluded the WSBA failed to meet its burden of proof on each count. WSBA disciplinary counsel appealed this decision to the Board pursuant to RLD 6.1, which allows parties, including disciplinary counsel, to appeal decisions of the hearing examiner to the Board.

failed to communicate with Menz regarding his knowledge that McKee owned no interest in his sister's house in violation of RPC 1.4; failed to represent Menz with due diligence by failing to secure an interest in McKee's sister's house in violation of RPC 1.3; and committed an act of moral turpitude in violation of RLD 1.1(a) by having sexual relations with Menz.

In a written opinion, the Board reversed the hearing examiner on seven of the eight counts, finding the hearing examiner's conclusions were not supported by the evidence or by the law. The Board found no violation as to Heard's alleged failure to obtain Menz's signature on the retainer, but sustained the other seven charges against Heard.

As to sanctions, the Board recommended a two-year suspension of Heard's license to practice and ordered him to pay restitution in the amount of $28,334.34 plus interest and costs. The Board based its sanctions recommendation on a finding of numerous aggravating circumstances including dishonest or selfish motives, vulnerability of victim, refusal to acknowledge wrongdoing, and indifference in making restitution. Heard appealed the Board's decision and sanctions recommendation to us. RLD 7.2.

ANALYSIS

The Washington State Supreme Court exercises plenary authority in matters of attorney discipline. RLD 2.1. Nevertheless, we have delegated specific responsibilities with respect to attorney discipline to the WSBA pursuant to the provisions of the RLD. With respect to initial fact-finding, a hearing examiner makes initial recommendations The Board's findings and recommendations essentially involve three issues: Heard's alleged misconduct involving the settlement agreement and his fee, Heard's alleged act of moral turpitude, and the sanction to be imposed against Heard, if any. We address each of these issues in order.

to the Board as to findings and [963 P.2d 823] conclusions. The Board is free to adopt, modify, or reverse findings, conclusions or recommendations of its hearing examiner. RLD 6.7(e); In re...