Matter of James, No. M-93-81.

Docket NºNo. M-93-81.
Citation452 A.2d 163
Case DateOctober 21, 1982
CourtCourt of Appeals of Columbia District
452 A.2d 163
In the Matter of Richard Allen JAMES, Respondent, A Member of the Bar of the District of Columbia Court of Appeals.
No. M-93-81.
District of Columbia Court of Appeals.
Argued May 26, 1982.
Decided October 21, 1982.

Page 164

Martha J. Tomich, Assistant Bar Counsel, with whom Edwin Yourman, Deputy Bar Counsel, Washington, D.C., was on the brief, for the Bd. on Professional Responsibility.

William F. Krebs, with whom Goeffrey P. Gitner, Washington, D.C., was on the brief, for respondent.

Before NEWMAN, Chief Judge, and MACK and PRYOR, Associate Judges.

NEWMAN, Chief Judge:


The Board on Professional Responsibility found that respondent had violated several disciplinary rules in connection with two matters involving different clients. With regard to one case, the Board found that respondent had improperly converted to his own use funds intended by the client to be paid to a third party in settlement of a legal dispute, and that this constituted, inter alia, "conduct involving dishonesty, fraud, deceit, or misrepresentation" in violation of DR [Disciplinary Rule] 1-102(A)(4). In the other case, the Board concluded that respondent violated DR 5-104(A) by failing to take appropriate steps to protect his clients from a potential conflict of interest that arose when he both drafted and entered into a real estate transaction with them, notwithstanding respondent's lack of fraudulent intent. Respondent challenges these findings and conclusions of law. He also asks us to reject the finding of one violation on the ground that he was not given adequate notice of the charge. A remand for reconsideration of

Page 165

the sanction is sought because respondent's opportunity to present mitigating evidence was allegedly inadequate. Finally, he contends that the Board's recommended sanction is unwarranted. We reject these challenges and adopt the recommended sanction of a two year suspension from the practice of law.

I. FACTS

A. The Coverdale Case (No. 319-79)

In September 1978 respondent was retained by Louvenia Coverdale to represent her as a defendant in a personal injury action. In October 1979, Mrs. Coverdale agreed to pay the plaintiff $1,250 in settlement of the dispute, and the suit was dismissed. Respondent billed her $1,500 for his services. She proposed to satisfy her obligations in monthly installments of $400, with half of each payment going to the plaintiff to satisfy the settlement, and half to respondent in payment of his fee. After the plaintiff rejected this arrangement, Mrs. Coverdale proposed to respondent that the full amount of each installment be paid to the plaintiff until the settlement was satisfied, and that subsequent payments be applied to the fee. According to Mrs. Coverdale's testimony, which was accepted by the Hearing Committee and the Board, respondent accepted this arrangement and promised to implement it on her behalf.1 Thereafter, Mrs. Coverdale gave respondent $350 in November 1979, and payments of $400 each in the succeeding three months. However, respondent made no effort to transfer funds to the plaintiff, and, without informing the client, deposited the payments in his personal professional account.2

In December 1979 or January 1980, the plaintiff's counsel informed respondent that he would seek judicial relief from the order of dismissal. Respondent then advised Mrs. Coverdale to suspend her payments until the court acted on the plaintiff's motion. On April 30, a hearing on the motion was held. Respondent told the court that his client had paid only $350 toward the settlement, and had not sent him any funds for three months. He failed to inform the court that payments were suspended on his own advice, and stated instead that his client was unable to pay any faster. He concurred in plaintiff's contention that Mrs. Coverdale had breached her agreement, and suggested that the plaintiff could attach her property to enforce it. The court stated that the motion would be denied if the full $1,250 was paid immediately. Respondent neither informed the court that his client had already paid him an amount sufficient to cover the settlement, nor offered to pay it forthwith. Instead, he requested fifteen days to attempt to raise the money. The court then granted the motion setting aside the settlement.

Respondent told Mrs. Coverdale that the reason the settlement was set aside was that the entire amount had not been paid within fifteen days of the settlement. He failed to inform her that the motion would have been denied if the full amount had been paid as of the hearing date.

The Hearing Committee found that respondent had violated several disciplinary rules in connection with the Coverdale matter: DR 1-102(A)(4) (conduct involving dishonesty, fraud, deceit, or misrepresentation); DR 1-102(A)(5) (conduct prejudicial to the administration of justice); DR 6-101(A)(3) (neglect of a legal matter); DR 7-101(A)(1)-(3) (intentionally failing to seek the lawful objectives of the client, failing to carry out a contract for legal services, and prejudicing the client during the course of the professional relationship); and DR 9-102(A) (failing to maintain client funds in an account separate from his own professional account). Only the finding of dishonesty and misrepresentation pursuant

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to DR 1-102(A)(4) was challenged before the Board. The Board accepted the Hearing Committee's findings.

B. The Scott Case (No. 312-79)

In November 1979, Walter and Saundra Scott retained respondent to aid them in renegotiating a lease on a building they owned, and in selling the property. Due to substantial losses incurred on the building, the Scotts were eager to dispose of it. After efforts to sell to third parties had failed, Mr. Scott suggested that respondent buy the property. Respondent then drafted two documents. The first was a contract to sell the building to respondent for $40,000. The second suggested that the Scotts would retain an equitable interest and that the sale proceeds would be applied to the maintenance of the property, after satisfaction of existing liens. Upon subsequent resale, the net proceeds would be divided equally between respondent and the Scotts. However, the contract did not expressly require respondent to sell the building, and did not establish time limits for its rehabilitation or sale. Neither did it establish whether the Scotts would be entitled to any part of future rents collected, or provide for contingencies that might interfere with the performance of the arrangement, such as respondent's death.

Respondent reviewed the documents with the Scotts for about an hour, after which the contracts were executed. It was agreed that the second agreement would not be disclosed to third parties, so that the tenant would not learn of the true nature of the sale. Respondent's share of the net proceeds would be in lieu of a prior hourly fee arrangement. Respondent subsequently testified that he had suggested that the Scotts consult independent counsel, but they could not recall such a suggestion. Due to difficulties in obtaining necessary approvals from the District of Columbia Rental Accommodations Office, the contracts were never carried out.

The Hearing Committee concluded that respondent violated DR 5-104(A) by failing to make the "full disclosure" necessary to protect his clients from the conflict of interest inherent in a contract in which he had a personal interest differing from that of the clients. The Board later concurred in that conclusion, finding that respondent neither "review[ed] with his clients in considerable detail the nature of the proposed agreement" nor "discussed in any detail . . . the nature of the potential conflict of interest." Board Report and Recommendation at 12.

II. FINDINGS OF DISHONESTY, FRAUD, DECEIT, AND MISREPRESENTATION

The sole substantive issue before us regarding the Coverdale case concerns the Board's finding of conduct involving dishonesty, fraud, deceit, and misrepresentation, which the Board found established a violation of DR 1-102(A)(4). We are required to accept that finding unless it is unsupported by substantial record evidence. D.C.App.R. XI § 7(3).

Testimony supporting a finding of dishonesty, etc., is more than ample. The client testified that respondent had agreed to forward her monthly payments to a third party in order to satisfy a settlement agreement. Respondent admittedly failed to do so. Instead, he applied the payments to his own account, without so informing the client. He later misled a court about the payments his client had made for purposes of satisfying the settlement agreement. He subsequently misinformed the client as to the reasons for the court's setting aside of the settlement agreement. The scienter requisite to a disciplinary code violation can be inferred from respondent's conduct. See Geffen v. State Bar of California, 14 Cal.3d 843, 122 Cal.Rptr. 865, 537 P.2d 1225 (1975) (knowledge of employee's improper solicitations); In re Vincent, 347 N.E.2d 40 (Ind. 1978) (intent to prejudice or damage client). Thus there is substantial evidence of...

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