In re Bernstein

• Decision Date: 07 June 2001
• Docket Number: No. 99-BG-1440.,99-BG-1440.
• Citation: 774 A.2d 309
• Parties: In re Kenneth H. BERNSTEIN, Respondent. A Member of the Bar of the District of Columbia Court of Appeals.
• Court: D.C. Court of Appeals

774 A.2d 309

In re Kenneth H. BERNSTEIN, Respondent.

A Member of the Bar of the District of Columbia Court of Appeals.

No. 99-BG-1440.

District of Columbia Court of Appeals.

Argued January 23, 2001.

Decided June 7, 2001.

Kenneth H. Bernstein, pro se.

Ross T. Dicker, Assistant Bar Counsel, with whom Joyce E. Peters, Bar Counsel, was on the brief, for the Office of Bar Counsel.

Before STEADMAN and SCHWELB, Associate Judges, and KERN, Senior Judge.

SCHWELB, Associate Judge:

The Board on Professional Responsibility (BPR or the Board) has recommended that Kenneth H. Bernstein, a member of our Bar since 1975, be suspended from practice for nine months for charging an unreasonable fee, for commingling, and for engaging in conduct involving dishonesty. The Board has further proposed that Bernstein's reinstatement be conditioned, inter alia, on his payment of restitution, with interest, to a former client, and on Bernstein's completion of a Continuing Legal Education course on professional responsibility. Bernstein has raised numerous objections to the Board's report and recommendation. With a single minor exception,¹ we impose the discipline recommended by the Board.

I. THE FACTS²

This case arises out of a workers' compensation claim that Bernstein filed with the Industrial Commission of Virginia (the Commission) more than ten years ago. Bernstein's client in that matter, John D. Smith, claimed to have suffered injuries to his back while employed in Virginia. Bernstein was not a member of the Virginia Bar, but he associated himself, for purposes of the representation, with an attorney who was admitted to practice in that jurisdiction.

In May 1992, Bernstein negotiated a settlement on Smith's behalf with the employer's attorney. Under the terms of the settlement, the employer was to pay Mr. Smith a total of $30,000. After securing his client's approval, Bernstein prepared, and Smith executed, a "Legal Services and Settlement Allocation Agreement" which provided that $9,000 of the $30,000 would be paid to Bernstein.

Under Virginia law, Bernstein's fee was subject to the approval of the Commission. On June 8, 1992, Bernstein wrote a letter to the Commission requesting approval of a fee "in the amount of 25% of the settlement amount," or $7,500. Bernstein noted in his letter that his client had agreed to the proposed fee.

In July 1992, the Commission rejected Bernstein's request for a fee of $7,500, and instead awarded him a total of only $4,000 for representing Mr. Smith. Bernstein later complained that the Commission's award represented "a 60% pay cut from his original agreement" with his client.³ Bernstein again requested the Commission to award him a fee of at least $7,500, and he stated that he was absorbing "$1,000 of what otherwise would be expenses of the client." On September 17, 1992, the Commission approved the settlement of $30,000, increased Bernstein's initial award by 50%, and directed that $6,000 be deducted from the total award and paid to Bernstein for his representation of Mr. Smith.

Although the Commission's revised fee award represented a substantial increase over the amount originally awarded, Bernstein apparently regarded it as unlawful and confiscatory. In any event, Bernstein ignored the Commission's decision. After receiving a check pursuant to the settlement,⁴ Bernstein retained $9,000, rather than $6,000, for himself. Notwithstanding his fiduciary obligation vis-a-vis his client, Bernstein did not inform Mr. Smith that the Commission had approved only $6,000 as Bernstein's compensation.⁵ Smith had previously been provided with documents revealing that it was the Commission's responsibility to designate the amount of Bernstein's fee.⁶ Under these circumstances, in the absence of information to the contrary from Bernstein, Smith could reasonably assume that any fee deducted by Bernstein from the proceeds of the settlement had been approved by the Commission.⁷

On October 5, 1992, upon receiving the settlement check, Bernstein deposited it in his business checking account at a local bank. Bernstein also maintained his own funds in this account. Thus, for a brief period, settlement funds belonging to Mr. Smith, as well as moneys owed to medical providers, were commingled with funds belonging to Bernstein. On October 13, 1992, after the check had cleared, Bernstein disbursed to his client all but $480 of the remaining settlement funds.⁸ As previously noted, however, he retained $9,000 of the proceeds for himself.

II. BERNSTEIN'S VIOLATIONS

On the basis of the facts summarized above, the Hearing Committee and the Board on Professional Responsibility both found, by clear and convincing evidence, that Bernstein had violated the following Rules of Professional Conduct:

Rule 1.5(a) Charging an excessive fee Rules 1.15(a) and 1.17(a) Commingling Rule 8.4(c) Dishonesty⁹

Each of these violations is well established in the record.

It is undisputed that although the Commission awarded Bernstein only $6,000 for his fees and expenses, Bernstein retained $9,000. The retention of the increased fee was unlawful, and therefore unreasonable. See In re Hudock, 544 A.2d 707, 708 (D.C. 1988) (per curiam)

; see also Hudock v. Va. State Bar, 233 Va. 390, 355 S.E.2d 601 (1987) (Hudock I). Bernstein argues that he earned the fee, that Mr. Smith owed him money, and that the fee was reasonable. But as BPR member Joanne Doddy Fort, writing for a unanimous Board, cogently explained in the Board's Report, Bernstein

had the opportunity to challenge the fee award before the Commission and he could have challenged the Commission's award in the courts of Virginia. He chose not to pursue the issue any further. Having made that decision, he became bound by the decision of the Commission. The issue before us is not a novel one. The Court has already clearly addressed the issue of what constitutes an "illegal fee" in the context of a Virginia workers compensation case in Hudock where the facts are virtually identical to the case before us. Based on the Court's ruling in Hudock, we conclude that Bar Counsel has shown by clear and convincing evidence that Respondent violated Rule 1.5(a) when he charged his client a higher fee than the fee approved by the Commission.

Turning to the commingling charges, the Board found, and we agree, that Bernstein violated Rule 1.15(a) by depositing the settlement funds in Smith's case into Bernstein's own operating account. See, e.g., In re Ross, 658 A.2d 209 (D.C.1995)

. The Board also found, and we again agree, that Bernstein violated Rule 1.17(a) by failing to segregate Smith's funds from his own. See, e.g., id.; In re Hessler, 549 A.2d 700 (D.C.1988) (construing former DR 9-103(A), the predecessor to Rule 1.17(a)). Bernstein claims that he was primarily a criminal practitioner and that he was unfamiliar with the proscriptions against commingling. This claim, even if factually true, does not constitute a defense to the charges. See Ross, supra, 658 A.2d at 210-11; In re Harrison, 461 A.2d 1034, 1036 n. 3 (D.C.1983). We therefore agree with the Board that Bar Counsel established these violations by clear and convincing evidence.¹⁰

Finally, the Board found that Bernstein had engaged in dishonesty, in violation of Rule 8.4(c):

Bar Counsel charged Respondent with a dishonesty violation for not informing his client that he had made a request to increase the Commission's award of a $4,000 legal fee to a fee of $7,500; for not telling his client that the Commission had awarded a $6,000 legal fee for the workers' compensation case and for taking the $9,000 fee after receiving the ruling of the Commission on the amount of legal fees to which he was entitled.

Respondent denies any dishonesty because his fee was, at all times, less than the one-third contingent fee that was reflected in the retainer agreement signed by his client. Moreover, Respondent maintains that he worked diligently for his fee over a year and a half period and obtained a favorable result for his client. Respondent has steadfastly insisted that he was entitled to his full fee and he has challenged the right of the Commission to reduce the fee to $6,000, calling the Commission's action "an unconstitutional State impairment of a private contract" amounting to "an unconstitutional `taking' without Due Process."

The Hearing Committee concluded that Bar Counsel had demonstrated by clear and convincing evidence that Respondent misled his client, deliberately took funds to which he was not entitled, and never informed his client of the Commission's award of legal fees in violation of Rule 8.4(c). The Committee concludes that Respondent's actions constituted acts of dishonesty under the definitions set out by the Court in In re Shorter, 570 A.2d 760 (D.C.1990). In Shorter, the Court defined "deceit" as "the suppression of a fact by one who is bound to disclose it," defined "misrepresentation" as a "statement made by a party that a thing is in fact a particular way, when it is not so; untrue representation; false or incorrect statements or accounts"; and defined "dishonesty" as "encompass[ing] fraudulent, deceitful, or misrepresentative behavior ... in addition... it encompasses conduct evincing a lack of honesty, probity or integrity in principle; [a] lack of fairness and straightforwardness."

We agree with the Hearing Committee that Respondent's conduct was dishonest. Because he disagreed with the adjustment that the Commission made to his legal fees, Respondent did not disclose the Commission Order concerning legal fees to his client; withheld from his client settlement funds that the Commission had ordered be paid to his client, and deliberately took and used funds that he was not entitled to take. We conclude that Bar Counsel has demonstrated a Rule 8.4(c) violation by clear and convincing evidence.

(Citations to record and some internal citations omitted; alterations in original.)

We adopt the foregoing analysis. W...