Iowa Supreme Court Bd. of Professional Ethics & Conduct v. Hoffman, 97-1015

• Decision Date: 24 December 1997
• Docket Number: No. 97-1015,97-1015
• Citation: 572 N.W.2d 904
• Parties: . Thomas J. HOFFMAN, Respondent. Supreme Court of Iowa
• Court: Iowa Supreme Court

Page 904

572 N.W.2d 904

IOWA SUPREME COURT BOARD OF PROFESSIONAL ETHICS AND CONDUCT, Complainant, v. Thomas J. HOFFMAN, Respondent.

No. 97-1015.

Supreme Court of Iowa.

Dec. 24, 1997.

Norman G. Bastemeyer and David J. Grace, Des Moines, for complainant.

Robert L. Sikma, Sioux City, for respondent.

Considered by LARSON, P.J., and CARTER, LAVORATO, NEUMAN, and SNELL, JJ.

SNELL, Justice.

This attorney disciplinary matter is before us for de novo review in accordance with Iowa Supreme Court rule 118.10. A division of the grievance commission has recommended that we suspend respondent's license to practice law for a period of six months based on respondent's attempt to collect excessive attorney fees. We concur in the commission's findings and its recommended sanction.

I. Respondent Thomas Hoffman entered into a contingent fee contract with Elaine Jahde on April 26, 1994, to represent her in an attempt to recover damages arising out of the employment-related or wrongful death of her husband, Richard Jahde. Richard Jahde died on April 18, 1994, from injuries sustained while working at Sioux Feed Company. Farmland Insurance Company provided workers' compensation coverage and general liability coverage for Sioux Feed. On April 19, 1994, Denise Baker Hamilton, the workers' compensation claims supervisor for Farmland, received notification by telephone of Richard Jahde's death. Hamilton initially was unsure whether Richard Jahde was an employee of Sioux Feed or an independent contractor and thus, whether his accident would be covered by workers' compensation benefits. However, after further investigation and an opinion letter from Farmland's counsel, Hamilton determined that Jahde's claim was compensable under the workers' compensation policy.

The attorney fee contract entered into by respondent and Elaine Jahde was intended to cover all claims arising out of Richard Jahde's death. At the time of the initial consultation with Elaine Jahde, respondent identified several possible theories of recovery which seemed promising, including: negligence, workers' compensation, co-employee liability, products liability and medical malpractice. The contract provided for a fee equal to twenty-five percent of the recovery if made without filing suit, a fee equal to thirty-three percent of the recovery if made after suit was filed and before notice of appeal to any appellate level, and a fee equal to forty percent of the recovery if retried. In the event no recovery was made, no fee for services would be charged. During the next several weeks, respondent began investigating the potential claims.

On June 1, 1994, Hamilton sent a letter to Elaine Jahde advising her that the incident resulting in Richard Jahde's death was covered by Sioux Feed's workers' compensation policy. Payment of the benefits owed Elaine Jahde began at that time. On June 2, 1994, while Farmland's letter acknowledging compensability was still in the mail, respondent sent an original notice and petition for workers' compensation benefits to Sioux Feed. At that time, respondent was not aware of the identity of Sioux Feed's workers' compensation carrier and had not made contact with any Farmland representative. Respondent learned of the Farmland letter and its acknowledgment of compensability on June 3, 1994, when he received a telephone call from Hamilton, who called regarding Sioux Feed's receipt of the workers' compensation petition. Although Hamilton advised respondent of Farmland's acknowledgment of coverage, respondent told her that he wished to pursue the workers' compensation claim for purposes of discovery on the other possible theories of recovery.

On June 7, 1994, respondent sent the workers' compensation petition along with proof of service to the industrial commissioner. Those papers were received and filed by the industrial commissioner on June 10, 1994. At the time of the service of the petition, respondent also served a discovery request on Sioux Feed seeking documents which would be relevant to Jahde's other potential claims, specifically, the co-employee liability claim. Farmland filed a motion to quash, arguing that since it had already acknowledged compensability, discovery should not be allowed to continue. A deputy industrial commissioner sustained Farmland's motion to quash, but conditioned the ruling on Farmland filing a written admission of liability. Farmland submitted a written admission of liability on July 25, 1994.

On September 2, 1994, respondent and Elaine Jahde signed an original notice and petition for a partial commutation of the workers' compensation benefits. The petition requested a partial commutation of $62,446 from the remaining total benefit amount of approximately $280,000. Attached to the petition was Elaine Jahde's claimant's statement of need, stating that partial commutation was needed because "I have agreed to pay attorney fees equal to 33% of the total settlement proceeds in this case [and] ... I do not otherwise have resources sufficient to pay attorney fees in this case." On October 2, 1994, respondent and Jahde signed an amended notice and petition for partial commutation, seeking a partial commutation of $37,277. Respondent testified that the amount stated in the original petition for commutation was miscalculated. Hamilton directed Farmland's legal counsel to resist the partial commutation because the fees requested were "unwarranted and excessive" and the partial commutation was not in Jahde's best interest.

A hearing was held regarding the partial commutation on February 1, 1995. Respondent submitted a time statement covering the period between April 26, 1994 and February 1, 1995. The statement showed that he expended 131.75 hours on Jahde's various claims during that time period. He also submitted a list of expenses incurred in working on the claims totaling approximately $3700. Respondent stated that the records were not kept contemporaneously with the work performed, but were reconstructed prior to the hearing.

The deputy industrial commissioner determined that because the workers' compensation recovery was obtained independent from any action taken by respondent, a contingent fee was "unreasonable and unwarranted." The deputy commissioner concluded that respondent was only "entitled to recover fees at an hourly rate for the amount of time reasonably attributable to the workers' compensation proceeding prior to the time that [Jahde] was notified that benefits were going to be voluntarily provided to her." The deputy commissioner found that only fifteen hours reported on the billing statement were reasonable with respect to work performed on Jahde's workers' compensation claim. The deputy commissioner concluded that partial commutation was not in Jahde's best interest and that respondent should not be allowed a fee in excess of $2250 plus reasonable expenses unless he sought approval of additional fees through the industrial commissioner. The deputy commissioner also concluded that Farmland's acknowledgment of compensability was not due to respondent's efforts. The deputy commissioner sent a copy of the commutation decision to the Committee on Professional Ethics and Conduct of the Iowa State Bar Association, now known as the Iowa Supreme Court Board of Professional Ethics and Conduct, which precipitated this proceeding.

During the discovery process on this disciplinary matter, the board submitted requests for admission to respondent. Request number six stated as follows: "The purpose of the proposed commutation was to collect a fee for Respondent's legal services." In his response to this request, respondent stated that the purpose of the proposed partial commutation was "[t]o collect [a] fee equal to value of attorney services performed plus expenses, rebating an amount in excess of same to Elaine I. Jahde." In his answers to interrogatories propounded by the board, respondent alleged that although he sought a partial commutation equal to thirty-three percent of the total workers' compensation recovery, he intended to keep only an amount computed on an hourly basis for time spent on all of Jahde's claims and for expenses in pursuing those claims. He alleged that he intended to return the excess to Jahde for her personal use.

Respondent testified at the grievance commission hearing that subsequent to the April written fee agreement, he and Jahde entered into a separate oral fee agreement under which he would be paid by the hour for time spent pursuing the co-employee liability case. There is no written record of this separate fee agreement nor are there contemporaneous billing records to support the agreement. While Jahde testified that an oral fee agreement had been entered into regarding the co-employee liability case, she was unclear as to the terms. Respondent testified that he sought the partial commutation to pay for the attorney fees accumulated under this oral fee agreement because Jahde was unwilling to use other assets to pay the hourly fees.

The alleged separate oral fee agreement for the co-employee liability case and respondent's intention to rebate a large portion of the amount received in the partial commutation to Jahde were not mentioned in the original petition for commutation, the amended petition, nor at the hearing before the commissioner. The only documents offered into evidence which support respondent's intent with regard to the partial commutation proceeds are letters to a deputy industrial commissioner and Farmland's counsel, which make reference to the proceeds being used for probate costs and pursuit of other claims.

The grievance commission concluded that the evidence presented did not support respondent's claim regarding the separate oral fee agreement for the co-employee liability claim. The commission also found that respondent had no intention of rebating a portion of the partial commutation proceeds to Jahde. The commission noted that if respondent's...