In re Haines

• Decision Date: 25 February 2008
• Docket Number: No. 06SA146.,06SA146.
• Citation: 177 P.3d 1239
• Parties: In the Matter of Susan G. HAINES, Attorney-Respondent.
• Court: Colorado Supreme Court

177 P.3d 1239

In the Matter of Susan G. HAINES, Attorney-Respondent.

No. 06SA146.

Supreme Court of Colorado, En Banc.

February 25, 2008.

Moye White LLP, Eric B. Liebman, Denver, Colorado, Attorneys for Appellant-Respondent Susan G. Haines.

John S. Gleason, Regulation Counsel, Kim Ikeler, Assistant Regulation Counsel, Denver, Colorado, Attorneys for Appellee-Petitioner Office of Attorney Regulation Counsel.

Justice HOBBS delivered the Opinion of the Court.

Respondent, Susan G. Haines, appeals the decision of the Hearing Board in this attorney regulation proceeding.¹ The Hearing Board determined that Haines violated several provisions of the Colorado Rules of Professional Conduct, most significantly that she knowingly misappropriated funds belonging to her client, the Edouart estate, in violation of Colo. RPC 8.4(c)(conduct involving dishonesty, fraud, deceit or misrepresentation, including knowing conversion). The Hearing Board also determined that Haines violated Colo. RPC 1.4(b) (failure to adequately explain a matter to a client) and Colo. RPC 1.15(a), (c) & (f)(1) (failure to keep disputed money separate). Examining factors applicable to the appropriate level of sanction, the Hearing Board imposed disbarment.

Substantial evidence in the record supports the Hearing Board's findings of fact and conclusions of law, including clear and convincing evidence that Haines: (1) knowingly misappropriated $70,000 belonging to her client estate deriving from a litigation settlement, which amount the personal representative and her co-counsel intended would be available to fund costs for additional litigation on behalf of the estate, and (2) lied in the Hearing Board proceedings that she had authorization to take this amount. We affirm the Hearing Board's order disbarring Haines and ordering her to pay restitution to the estate and the costs of the proceedings. However, we reduce the amount of restitution to $65,000 in recognition of the personal representative's testimony that he had authorized the Haines firm to pay itself a minor amount in fees, approximately $5,000.

We disapprove of the Hearing Board's conclusion that Haines knowingly misappropriated money belonging to her litigation co-counsel, Michael T. Mihm. Although Haines acted deceitfully towards Mihm, he had agreed with the personal representative to defer payment of his portion of the contingency fee in favor of the entire settlement proceeds being deposited into the estate account. Thus, the money she took belonged to the estate, not Mihm.

I.

Haines received a license to practice law in Colorado on October 30, 1984. She is subject to our jurisdiction pursuant to C.R.C.P. 251.1(b).

Haines represented the Dorothy Edouart estate. The estate's personal representative was John Erpelding, an experienced attorney who practiced probate law in California for nearly fifty years and agreed to serve as the personal representative after Haines assured him that her firm would perform all administrative work. Erpelding was in poor health and died while the disciplinary proceedings in this case were being pursued.

As fiduciaries of the estate, Haines and Erpelding were responsible for identifying and marshaling estate assets, including any potential litigation claims. They identified possible fraud and undue influence claims against Howard Zwick, Edouart's son, and Laurent Rousseau, Zwick's attorney. They also identified possible malpractice claims against Edouart's former attorney, Susan Chenault.

Haines and Erpelding agreed that any fees for administrative work completed by Haines's firm for the benefit of the estate would be compensated on an hourly basis. Litigation fees and costs would be subject to a contingency fee agreement.

In 2001, the estate hired Mihm of Kennedy & Christopher, P.C. to act as lead litigation counsel. The contingency fee agreement between Mihm and the estate provided that one-third of the gross recovery to the estate from litigation, resulting from the collection of a judgment or payment of a settlement, would be shared between Haines's law firm and Kennedy & Christopher, based upon the relative proportion of the litigation work conducted by the two firms. The contingency fee agreement also made the estate liable for the payment of costs of litigation.

In early December of 2002, the estate settled certain claims brought in a Florida federal district court against Chenault. Mihm and Erpelding were together in Florida for the litigation when the parties agreed to settle for $200,000. They both talked with Haines over the phone, informing her of the settlement.

Under the contingency fee agreement, Mihm would have been entitled to approximately $63,000 in fees from the settlement funds, while Haines would have been entitled to $4,000 in fees.² After agreeing to the settlement, Mihm and Erpelding discussed a proposal whereby Mihm agreed to defer his portion of the contingent fee in the interest of pursuing additional litigation against Zwick and Rousseau in Rhode Island and an appeal in Florida. However, Mihm wanted payment of the litigation costs advanced by his firm in the Florida litigation for which the estate had no ability to pay while the litigation was proceeding.

Erpelding agreed to this proposal. Mihm then explained his proposal for distribution of the settlement proceeds to Haines and John Campbell, a shareholder of Haines's firm, during a December 19, 2002 meeting that focused mainly on strategy for additional litigation in Rhode Island and Florida. Mihm subsequently memorialized this discussion in a letter dated the same day. Erpelding received this letter and, in a phone conversation on December 23 with Campbell, Erpelding stated his authorization for payment of Mihm's costs from estate funds, with the understanding that the entire $200,000 from the settlement would be deposited into the estate account. Erpelding did not authorize Haines, Campbell, or any other person to withdraw $70,000 from the estate account to pay Haines's firm for fees.

In the December 23 phone call, Erpelding recalled Campbell mentioning payment of fees to Haines's firm, but assumed that Campbell was talking about a small amount that would be calculated on the basis of the estate's assets, as provided by California probate law. He expected that the amount would be around $5,000. Erpelding testified that neither Haines nor Campbell informed him that Colorado law allowed the payment of estate administration fees by a personal representative in a larger amount, without court approval.

What occurred between December 19 and December 31, 2002 and led to this disciplinary proceeding was disputed in a lengthy Hearing Board proceeding. On December 19, 2002, Mihm, Haines, and others met for more than four hours, without Erpelding, to discuss future litigation strategies, as well as the disbursement of the $200,000 in settlement funds. At the time of this meeting, the estate owed both Mihm and Haines significant legal fees. Mihm had logged approximately $500,000 in fees directly related to the Florida litigation and had advanced costs to pursue the litigation.³ Haines's firm had logged nearly $100,000 for administrative work done on behalf of the estate. Most of this administrative work had been completed prior to the hiring of Mihm, was unrelated to the litigation, and was to be billed on an hourly basis.

The Hearing Board found that, during the December 19 meeting, Haines considered an alternative distribution scheme for the settlement funds that would have her firm being paid $70,000 once the settlement check was deposited into the estate's account. Based on Mihm's testimony, and that of an associate of his firm, the Hearing Board found that Haines did not announce this intention at the December 19 meeting or at a subsequent meeting between Haines and Mihm on December 30. Instead, she kept silent.

Haines testified that she had mentioned the $70,000 amount during the December 19 meeting. She pointed to notes she had made at the meeting with the amounts $70,000, $84,000 and $25,000 written on them. Ingrid Vinci, an associate of Mihm's, who transcribed Haines's notes of the meeting for everyone in attendance, stated that Haines's handwritten notes did not contain these figures, suggesting that Haines had added these figures to the back side of the original page of notes at some later time.

Haines testified that she had a phone conversation with Erpelding around December 22 in which she informed him of her intent to pay her firm $70,000. Erpelding denied that she had such a conversation with him. Campbell testified that Haines had mentioned the $70,000 amount at the December 19 meeting. The Hearing Board found Erpelding and Mihm's testimony to be credible and that neither Haines nor Campbell had obtained authorization from Erpelding or Mihm to withdraw $70,000 from the estate account.

On December 30, Mihm and Haines met again to discuss litigation strategy. Haines did not mention to Mihm that she intended to withdraw $70,000 from the estate account upon deposit of the settlement proceeds.

Mihm received the settlement check and endorsed it for deposit to the estate's bank account on December 31. That same day, Haines's employee picked up the settlement check from Mihm and deposited it into the estate's bank account. Haines drafted two checks—one for $37,000 and the other for $33,000. The check for $37,000 bears Haines's notation "probate fees & costs— Eduoart Estate." The check for $33,000 bears Haines's notation "Probate fees & Costs in Chenault Litigation." The deposit ticket into Haines's firm's operating account reads: "Edouart estate $37,000" and "Conting. $33,000." Both checks were deposited and negotiated on December 31, 2002. Immediately prior to the deposit of the settlement check, the estate's account had a balance of approximately $800.

Haines also drafted two checks for Mihm: an $84,000 check made out to Kennedy & Christopher for...