Cincinnati Bar Assn. v. Schultz , 1994 Ohio 46 ( 1994 )

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Cincinnati Bar Association v. Schultz et al.
[Cite as Cincinnati Bar Assn. v. Schultz (1994),
Ohio St.3d. .]
Attorneys at law -- Misconduct -- Two-year suspension with one
year suspended on condition that attorney satisfactorily
complete one year of supervised probation -- Charging an
illegal or excessive fee -- Failure to return unearned fee
-- Withdrawal from representation without taking
reasonable steps to avoid foreseeable prejudice to client
-- Attempting to limit liability to client for malpractice
-- Representation of clients whose interests conflict --
Accepting compensation from source other than client.
(No. 94-1796 -- Submitted October 24, 1994 -- Decided
December 30, 1994.)
On Certified Report by the Board of Commissioners on
Grievances and Discipline of the Supreme Court, No. 93-25.
In a complaint filed June 21, 1993, relator, Cincinnati
Bar Association, charged respondents, D.C. Schultz Co., L.P.A.
("D.C. Schultz"), and its majority shareholder, Donna C.
Schultz of Cincinnati, Ohio, Attorney Registration No. 0022091("Schultz"), with two counts of professional misconduct.
Respondents answered, and the matter was submitted to a panel
of the Board of Commissioners on Grievances and Discipline of
the Supreme Court on stipulated facts and exhibits and
Schultz's affidavit.
The first count of the complaint alleged a variety of
misconduct in D.C. Schultz's representation of six different
clients from 1989 through 1992. The evidence established that
three of these clients, Jennifer Nichols, Mary Ann Bill, and
Dr. Roland V. Boike, were required by the firm's policy to sign
contingent-fee agreements that provided for an hourly rate
charge if the clients discharged the firm. The panel found
that this arrangement was contrary to the shared risk of
nonrecovery a contingent-fee agreement represents. Moreover,
the hourly rate fee did not account for factors in DR 2-106(B)
1 that determine the reasonable value of a discharged,
contingent-fee attorney's services and are the measure for such
an attorney's recovery in quantum meruit. See Fox & Associates
Co., L.P.A. v. Purdon (1989), 44 Ohio St.3d 69, 541 N.E.2d
448, syllabus. The panel concluded that this practice violated
DR 2-106(A) (charging an illegal or excessive fee).
Also pursuant to its policy, D.C. Schultz charged the
other three clients, Diana Lawson, Jennifer Werner, and Cindy
Lynn Allen, nonrefundable retainer/engagement fees in the
amounts of $500, $530, and $850, respectively. According to
the agreements they signed, these amounts were to be credited
toward future charges, but were also considered "earned upon
receipt." The panel determined that this practice enabled D.C.
Schultz to retain fees for which the client received no
benefit. Lawson and Allen were further required to sign
undated entries consenting to D.C. Schultz's withdrawal, which
the firm's support staff used as leverage when Lawson and Allen
did not promptly pay charges above the retainer/engagement fee
amounts. The panel concluded that these two aspects of D.C.
Schultz's policy violated DR 2-106(A) and 2-110(A)(3) (failure
to return unearned fee). Moreover, because D.C. Schultz either
used or attempted to use the nonconcomitant consent forms to
withdraw its representation when Lawson and Allen did not
rectify their delinquency, the panel found the firm in
violation of DR 2-110(A)(2) (withdrawal from representation
without taking reasonable steps to avoid forseeable prejudice
to client).
The evidence further established that D.C. Schultz
committed misconduct when Allen decided to change attorneys.
Allen requested release of her file to an attorney who had been
assigned her case while he was employed by D.C. Schultz and who
had later left the firm. Schultz personally instructed
employees of D.C. Schultz not to forward the file until Allen
signed a confidential release of all claims against the firm.
The panel found that this instruction violated DR 6-102(A)
(attempting to limit liability to client for malpractice).
Finally, the evidence in support of Count I established
that, per D.C. Schultz policy, the Nichols and Bill
contingent-fee agreements authorized the firm to pay
subrogation claims from any settlement or judgment obtained on
the clients' behalf and to receive a fee from the subrogee for
this service. D.C. Schultz did not act on this provision in
either contract, but the arrangement necessarily promised to
reduce the clients' shares of any proceeds. Accordingly, the
panel found violations of DR 5-105(A) and (C) (representation
of clients whose interests conflict) and 5-1-7(A)(1) (accepting
compensation from source other than client).
Count II of the complaint charged, in essence, that
Schultz should be held professionally responsible for the
misconduct committed by attorneys employed by D.C. Schultz.
The panel agreed based on Disciplinary Counsel v. Ball (1993),
67 Ohio St.3d 401, 618 N.E.2d 159, in which disciplinary
measures were imposed due to a lawyer's careless delegation of
administrative probate matters to an untrustworthy employee.
Before recommending a sanction for the identified
misconduct, the panel considered that Schultz had moved
out-of-state, that she was no longer practicing law, and that
D.C. Schultz had ceased practicing law, referred its clients,
and sold its other assets. The panel then rejected the
recommendation jointly submitted by the parties, which included
a one-year suspension from the practice of law, to be followed
by a one-year supervised probation period if Schultz were
subsequently readmitted to the Ohio Bar. The panel modified
this suggestion and recommended that Schultz be suspended from
the practice of law for two years, with the second year of this
period to be suspended on the condition that she serve one-year
under supervised probation. The panel further recommended that
the supervised probation period focus on the appropriate
delegation of duties to support staff, as well as proper
billing practices, fee agreements, and release of client files
upon dismissal. The board adopted the panel's findings and its
recommendation.
Gates T. Richards, Thomas M. Tepe, Naomi Dallob and E.
Hanlin Bavely, for relator.
Santen & Hughes and William E. Santen; Helmer, Lugbill,
Martins & Neff and James B. Helmer, Jr., for respondents.
Per Curiam. We have reviewed the record submitted by the
parties and concur in the board's findings of misconduct and
recommended sanction. Our decision to hold the majority
shareholder of a legal professional association vicariously
responsible for the disciplinary offenses of attorneys employed
by the association is specifically authorized by Gov.Bar.R.
III(3)(C), which states:
"A breach of * * * [any duty imposed by the Supreme Court
Rules for the Government of the Bar or the Code of Professional
Responsibility] on the part of the [legal professional]
association shall be considered a breach upon the part of the
individual participating in the breach and the shareholder,
director, and officer having knowledge of the breach."
The misconduct committed in this case resulted either from
policies imposed by D.C. Schultz's majority shareholder or from
her specific instruction. Donna C. Schultz is therefore
suspended from the practice of law in Ohio for two years;
however, one year of that period is suspended on the condition
that she satisfactorily complete one year of supervised
probation in accordance with the guidelines stated by the
panel's report. Costs taxed to respondent Schultz.
Judgment accordingly.
Moyer, C.J., A.W. Sweeney, Douglas, Wright, Resnick, F.E.
Sweeney and Pfeifer, JJ., concur.
1 DR 2-106(B) states:
"A fee is clearly excessive when, after a review of the
facts, a lawyer of ordinary prudence would be left with a
definite and firm conviction that the fee is in excess of a
reasonable fee. Factors to be considered as guides in
determining the reasonableness of a fee include the following:
"(1) The time and labor required, the novelty and
difficulty of the questions involved, and the skill requisite
to perform the legal service properly.
"(2) The liklihood, if apparent to the client, that
acceptance of the particular employment will preclude other
employment by the lawyer.
"(3) The fee customarily charged in the locality for
similar legal services.
"(4) The amount involved and the results obtained.
"(5) The time limitations imposed by the client or by the
circumstances.
"(6) The nature and length of the professional
relationship with the client.
"(7) The experience, reputation, and ability of the
lawyer or lawyers performing the services.
"(8) Whether the fee is fixed or contingent."