In re Fountain

• Decision Date: 01 December 2006
• Docket Number: Nos. 1, 2006.,Nos. 3, 2006.,Board Case Nos. 30, 2005.,Nos. 2, 2006.,Nos. 471, 2006.,s. 471, 2006.,s. 1, 2006.,s. 2, 2006.,s. 3, 2006.
• Citation: 913 A.2d 1180
• Parties: In the Matter of a Member of the Bar of the Supreme Court of Delaware, Darryl K. FOUNTAIN, Respondent.
• Court: Supreme Court of Delaware

Page 1180

913 A.2d 1180

In the Matter of a Member of the Bar of the Supreme Court of Delaware, Darryl K. FOUNTAIN, Respondent.

Nos. 471, 2006.

Board Case Nos. 30, 2005.

Nos. 1, 2006.

Nos. 2, 2006.

Nos. 3, 2006.

Supreme Court of Delaware.

Submitted: November 8, 2006.

Decided: December 1, 2006.

Disciplinary Proceeding Upon Final Report of the Board on Professional Responsibility of the Supreme Court. Disbarment Imposed.

James E. Liguori, Liguori, Morris, Yienst, Dover, DE, for Darryl K. Fountain.

Patricia Bartley Schwartz, Office of Disciplinary Counsel, Wilmington, DE.

Before HOLLAND, BERGER and JACOBS, Justices.

PER CURIAM:

This is an attorney disciplinary matter directed to charges of professional misconduct against Darryl K. Fountain, the Respondent. The report of the Board on Professional Responsibility (the "Board") concluded that Fountain knowingly misappropriated client funds by depositing unearned retainers into his operating account, by refusing to refund unearned retainers and by converting to his own use the Medicaid reimbursement payment of one client ("Board Report"). As a result of Fountain's ethical violations, the Delaware Lawyers' Fund for Client Protection ("LFCP") has paid out more than $100,000 in claims. In this opinion, we approve the Board's recommendation that Fountain be disbarred.

Vacatur Properly Denied¹

The Petition for Discipline was filed on April 5, 2006, and Fountain's answer was due no later than April 26, 2006. Fountain did not file a timely answer nor did he seek an extension of time to file an answer. Accordingly, on April 27, 2006, the Office of Disciplinary Counsel ("ODC") made a written request that the allegations and charges set forth in the Petition be deemed admitted pursuant to Rule 9(d)(2) of the Delaware Lawyers Rules of Disciplinary Procedure. Fountain did not oppose this request or otherwise respond to it. On May 8, 2006, the Chair of the Panel (the "Chair") wrote to the parties advising that the allegations in the Petition were deemed admitted because no answer or request for an extension of time to answer had been filed.

On May 26, 2006, Fountain sent a letter to the Chair requesting that the deemed admission be vacated. Fountain stated that he had recently been released from the hospital for treatment of an ulcer. He did not, however, provide the dates or any evidence of his hospitalization, nor did he provide any medical documentation that he was unable to respond to the Petition. Fountain also submitted a proposed Answer.

ODC objected to Fountain's request to vacate. On June 5, 2006, the Chair sent a letter denying the request to vacate the deemed admissions. The Chair explained that under Procedural Rule 9(d)(2), the failure to file a timely answer required that the allegations and charges in the Petition be deemed admitted. Specifically, Rule 9(d)(2) states in pertinent part:

In the event the Respondent fails to serve an answer within the prescribed time, all of the allegations and charges in the petition shall be deemed admitted, such that the sole remaining issue to be determined by the Board shall be the appropriate disciplinary sanction. (Emphasis added).

In addition, the Chair noted that Fountain had not submitted any proof of his hospitalization or other evidence of the health problems which he had cited as the reasons for his failure to file a timely answer. Accordingly, even if the Chair had discretion under Procedural Rule 9(d)(2), the request to vacate would have been denied.

On June 16, 2006, Fountain filed a Motion for Reargument in Support of Vacating the Default Judgment. On June 21, 2006, the Chair denied the Motion for Reargument, again explaining that Rule 9(d)(2) used the mandatory word "shall" and not the permissive word "may." In addition, the Chair explained that even if Procedural Rule 9(d)(2) gave the Chair discretion, Fountain had still not submitted any medical evidence supporting his claim that he was unable either to timely answer the Petition or to request an extension.

Fountain has filed objections to the Board's Report on the basis of its decision to deny his application for vacatur. We have concluded that Fountain's objections are without merit. The Board's decision to deny Fountain's application for vacatur is supported by the record and is the product of an orderly reasoning process.

Facts²

Fountain was admitted to the Bar of the Supreme Court of Delaware in 1984.³ At all relevant times, Fountain was engaged in the private practice of law with an office in Wilmington.

Board Case No. 30, 2005(ODC)

On July 11, 2005, Fountain was suspended for three years from the practice of law. The suspension was based on a "multi-year failure to maintain proper books and records and safeguard client funds; a failure to timely file and pay personal state and federal income taxes; and a ten-year failure to accurately report the status of his books and records on his Certificates of Compliance."⁴

By Order of the Court of Chancery dated July 14, 2005, Randolph K. Herndon, Esquire, was appointed Receiver of Fountain's law practice. He took immediate control of Fountain's law firm files, books and records, and bank accounts. The negative balance in Fountain's operating account on July 14, 2005 was ( — )$1,677.77, and the balance in his escrow account was $33.50.

On July 17, 2005, Mr. Herndon met with Fountain to discuss the client files and accounts. During this discussion, Fountain told Mr. Herndon that there was potentially $46,000 of unearned fees and other funds that Fountain owed to approximately 22 clients.

At the request of ODC, Joseph McCullough, auditor for the LFCP, conducted an audit of Fountain's law practice to determine how funds were received into the practice and how the funds were withdrawn. Mr. McCullough selected three client matters, which he detailed in his audit report, that are indicative of Fountain's practices in handling money coming into the firm. These client matters indicate that large retainer checks would either be (1) cashed; (2) deposited into Fountain's operating account and the entire amount withdrawn the following day or very shortly thereafter; or (3) deposited into Fountain's escrow account and the entire amount withdrawn the following day or very shortly thereafter.

Mr. McCullough also reviewed various Internal Revenue Service ("IRS") notices received by the Receiver which revealed that the IRS had no record of Fountain having filed or paid taxes for the tax years 1998, 1999, 2002 and 2003. Mr. McCullough also reviewed numerous W-2G forms showing that Fountain had amassed over $617,000 in gambling proceeds from 1999-2004. In two previous audits conducted by the LFCP, on April 2, 2004 and September 1, 2004, respectively, Fountain indicated that he had not filed his 2002 federal and state tax returns. He did not mention, however, that he had not filed tax returns for the years 1998, 1999 and 2003.

Board Case No. 1, 2006 (Bernadeane Thompson)

In July 2004, Bernadeane Thompson retained Fountain to represent her in a creditor matter involving her business, B & B Container. On July 15, 2004, Ms. Thompson gave Fountain two checks. One check in the amount of $12,500 was to be used to pay a creditor, Center Capital Corporation. A lump sum payment of $10,000 would be paid to reduce the debt owed to this creditor. The remaining $2,500 was to be Fountain's flat fee for handling the matter. The second check was in the amount of $2,500 and was to be a down payment on a $5,000 retainer to Fountain for future legal services which, Fountain said, would "keep the wolves from [her] door."

On July 16, 2004, Fountain cashed Ms. Thompson's $12,500 check at her bank, Wachovia Bank. On July 19, 2004, Fountain deposited the $2,500 check into his escrow account. Ms. Thompson made two more check payments to Fountain to complete the $5,000 retainer. The first check, issued on July 26, 2004, was in the amount of $1,000 and was cashed by Fountain on the same day at Wachovia Bank. The second check, issued on August 5, 2004, in the amount of $1,500, was cashed by Fountain on August 9, 2004 at Wachovia Bank.

On December 10, 2004, Fountain called Ms. Thompson regarding a new security agreement on her loan with Center Capital. She signed the agreement on that day. The agreement provided for new loan terms and a lump sum payment of $7,000 on her existing debt. Fountain explained that he had been able to negotiate the intended $10,000 lump sum payment down to $7,000. Ms. Thompson understood that the $3,000 difference would be deposited into Fountain's escrow account and used for future legal services. The $3,000 was never returned to Ms. Thompson, nor was she ever provided any type of statement showing how it was used. Nor did Ms. Thompson ever receive any statement showing how the $5,000 retainer was used.

In early 2005, Ms. Thompson received a subpoena to appear in Superior Court on January 28, 2005, in the matter of Center Capital v. B & B Container, Inc. and Bernadeane Thompson, and to produce proof of payment or attempted payment to Center Capital. Center Capital had not received her signed security agreement or any lump sum payment. Ms. Thompson was then presented with another security agreement to sign, which she did, and then forwarded it to Fountain's office. On March 16, 2005, Fountain paid Center Capital $7,000 on Ms. Thompson's behalf.

On June 14, 2005, Ms. Thompson terminated Fountain's representation and requested an accounting of the use of her funds, as well as a refund of any unused funds. Ms. Thompson sent numerous faxes to Fountain requesting an accounting and a refund. Each fax was answered by a fax from Fountain saying that he did a lot of work for Ms. Thompson and that he would refund the balance of the Center Capital advance. No accounting was provided and no monies were refunded.

On July 20, 2005, Ms. Thompson filed a claim with the LFCP for $8,900, consisting of (1) $3,000 representing...