Lawyer Disciplinary Board v. Benjamin F. White

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September 2014 Term
_______________ FILED
September 30, 2014
released at 3:00 p.m.
No. 12-1172 RORY L. PERRY II, CLERK
_______________ SUPREME COURT OF APPEALS
OF WEST VIRGINIA
LAWYER DISCIPLINARY BOARD,
Petitioner
v.
BENJAMIN F. WHITE,
a member of the West Virginia State Bar,
Respondent
____________________________________________________________
Lawyer Disciplinary Proceeding
REPRIMAND AND OTHER SANCTIONS
____________________________________________________________
Submitted: September 10, 2014
Filed: September 30, 2014
Rachael L. Fletcher Cipoletti, Esq. Sherri Goodman Reveal, Esq.
Chief Lawyer Disciplinary Counsel Charleston, West Virginia
Office of Disciplinary Counsel Counsel for the Respondent
Charleston, West Virginia
Counsel for the Petitioner
JUSTICE KETCHUM delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. “Rule 3.7 of the Rules of Lawyer Disciplinary Procedure, effective
July 1, 1994, requires the Office of Disciplinary Counsel to prove the allegations of the
formal charge by clear and convincing evidence.” Syl. Pt. 1, in part, Lawyer Disciplinary
Bd. v. McGraw, 194 W.Va. 788, 461 S.E.2d 850 (1995).
2. “Rule 3.16 of the West Virginia Rules of Lawyer Disciplinary
Procedure enumerates factors to be considered in imposing sanctions and provides as
follows: ‘In imposing a sanction after a finding of lawyer misconduct, unless otherwise
provided in these rules, the Court [West Virginia Supreme Court of Appeals] or Board
[Lawyer Disciplinary Board] shall consider the following factors: (1) whether the lawyer
has violated a duty owed to a client, to the public, to the legal system, or to the
profession; (2) whether the lawyer acted intentionally, knowingly, or negligently; (3) the
amount of the actual or potential injury caused by the lawyer’s misconduct; and (4) the
existence of any aggravating or mitigating factors.’” Syl. Pt. 4, Office of Lawyer
Disciplinary Counsel v. Jordan, 204 W.Va. 495, 513 S.E.2d 722 (1998).
Justice Ketchum:
This disciplinary proceeding was instituted by the Office of Disciplinary
Counsel (“ODC”) of the West Virginia State Bar, against the Respondent, Benjamin F.
White. The ODC asserted that White violated six Rules of Professional Conduct in a
dispute over fees with his employer, a law firm.
However, a Hearing Panel Subcommittee of the Lawyer Disciplinary Board
(“Board”) found clear and convincing evidence that White violated only two Rules of
Professional Conduct. The Board recommends that this Court reprimand White, order
him to take an additional six hours of continuing legal education with a focus on legal
ethics and law office management, and require him to pay the costs of the disciplinary
hearing. The ODC objects to the Board’s findings and recommendation and asserts that
this Court should annul White’s license to practice law.
Based upon our review, we conclude that the Board’s findings are
supported by the record. As set forth below, we adopt the Board’s recommended
sanctions.
I.
FACTUAL AND PROCEDURAL BACKGROUND
Lawyer White was admitted to the West Virginia Bar in 2005. In 2008, he
joined the Hendrickson and Long (“H&L”) law firm in Charleston, West Virginia, as an
associate handling social security disability cases. White’s annual compensation of
$160,000 from the firm was to be paid half in salary and half in the form of a loan. At
1
the time of his hiring, White understood the fees generated by his social security
disability cases would be credited against the loan. However, his employment agreement
was silent on this issue.
White later learned that H&L was not crediting the social security disability
fees he earned against his loan, and from February 2009 to May 2009, he withheld his
incoming social security disability fees from H&L by keeping them in his desk drawer.
H&L filed a complaint with the ODC from which this case originated.
A. The Employment Agreement
In early 2008, White was practicing social security disability law at a law
firm where he was earning approximately $160,000 per year. An H&L attorney initiated
talks with White about joining H&L as a lawyer handling social security disability cases.
White later met with H&L’s founders, David Hendrickson (“Hendrickson”) and Scott
Long (“Long”), at Hendrickson’s house to discuss his employment.
During this meeting, Hendrickson, Long, and White discussed White’s
salary, but they did not discuss how the fees from White’s social security disability cases
were to be split. White testified that he explained to Hendrickson and Long that he
would not leave his current position for less than the $160,000 salary he was being paid
by his present employer.
White testified that Hendrickson and Long orally agreed to pay him
$160,000 per year but said $80,000 would be disguised as a “loan” because the other
associates at H&L did not make that much money. White further testified that they
2
agreed that the loan would be paid back through “bonuses and a split [of social security
disability fees].” The remaining $80,000 would be in the typical form of a salary.
Shortly thereafter, on March 25, 2008, H&L’s office manager, Rick Fisher
(“Fisher”), drafted a very short employment letter based on Hendrickson’s recollection of
the meeting. The letter failed to address whether any of the social security disability fees
White earned would be applied against the loan. The letter states: “Your beginning
salary will be $80,000 per year, plus a loan amount up to $80,000 per year, to be paid
back from your bonus amounts. Terms of the loan will be under a separate agreement to
be worked out mutually.” However, H&L never attempted to work out a mutual
agreement on the terms of the loan. The letter’s salary amount plus the loan amount
equaled $160,000, which is consistent with White’s testimony regarding his accounting
of the meeting.
White believed that the social security disability fees, along with bonuses,
would be credited against his loan from H&L. There is no evidence that anyone told
White that H&L interpreted the employment letter to mean that all social security
disability fees would belong entirely to H&L and would not be used to pay the $80,000
loan.
Six months later, in September 2008, H&L unilaterally gave White a Line
of Credit Promissory Note. The terms had not been worked out mutually as provided in
the employment letter. White protested the note because it differed from the employment
letter. The note changed the loan’s designation to a “line of credit” that was available
3
only until December 31, 2009, and said that the principal must be repaid by May 1, 2011.
White testified that he signed the note after Long assured him that it would not change
their employment agreement and after Fisher threatened to withhold payment on the loan
if White did not sign.
According to the promissory note, an employee bonus program controlled
how the loan would be repaid. Fisher could not affirmatively testify that he remembered
explaining the bonus plan to White. There is also no evidence that White received a copy
of H&L’s bonus plan. Additionally, there is no testimony that anyone at the firm told
White that H&L’s employee bonus plan would not include the social security disability
fees earned by White.
One month after White received the promissory note, he learned that H&L
was not crediting the social security disability fees he generated against the loan. Instead,
he learned the bonus program required him to be “profitable” before he received any
bonus amount at all.1 In addition, H&L attributed $100,000 in overhead to White, which
made it more difficult for him to become profitable and thus receive bonuses under the
plan. White finally asked Fisher how much of the social security disability fees would be
1
Fisher testified that to be “profitable” under H&L’s bonus plan, an associate’s
profit must exceed his or her direct and indirect costs. Direct costs include salary, health
insurance, parking costs, etc. Indirect costs include overhead. Nevertheless, even if an
associate is “profitable” under this definition, the associate does not get a bonus unless
the firm itself is profitable as well.
4
credited against the $80,000 loan, to which Fisher responded that he did not know what
White was talking about.
B. White’s Employment at H&L
White began working for H&L in April 2008. At first, White’s practice
was to remit the social security disability fees to H&L as he received them, believing that
H&L would credit these fees against his loan.2 White continued to remit the social
security disability fees even after he discovered that H&L was not crediting these fees
against his loan because he believed he would be able to resolve his dispute with H&L.
In January 2009, H&L merged with a Pittsburgh based law firm, Eckert
Seamans, and White began to feel uncertain regarding his future at either firm, much less
his ability to resolve the dispute about the social security disability fees.3 White claims
that because of this uncertainty, he began withholding the social security disability fees
from H&L and started to keep the checks for the fees in his desk drawer.4
2
The checks were in White’s name, not H&L’s, because the Social Security
Administration’s policy is to accept only the name of individual lawyers as
representatives, not law firms. Once the Social Security Administration approves a
representative’s fee, it issues a check payable to the individual lawyer. H&L was aware
of this policy.
3
H&L continued to exist after the merger.
4
White testified as follows regarding the effect his uncertainty had on his
misconduct:
David would not talk to me. The folks at Eckert
Seamans wouldn’t talk to me about it. I had called them on
some other issues and was advised not to call them ever
Continued . . .
5
White continued to keep the fees generated by his social security disability
cases in his desk drawer for the next three months. In total, White withheld
approximately $46,000 in social security fee disability checks, and he cashed $5,607.41
of these checks in April and in May, after he learned that Eckert Seamans decided not to
hire him.
In May 2009, H&L learned that White was withholding social security
disability fee checks from them when Fisher went into White’s office one morning,
without White’s knowledge, and discovered scanned copies of withheld social security
disability fee checks on White’s computer. Hendrickson, Fisher, and White met
regarding Fisher’s discovery. According to White, when he tried to explain his position
and offered to place the checks in escrow, Hendrickson screamed at him and told him to
leave the building. Soon thereafter, H&L gave White a letter terminating him as an
associate at H&L.
again. And in between there, Eckert Seamans had told
[Fisher] to pay me with an H&L check and send them an
invoice and they would reimburse my salary. And I didn’t
want to keep giving those monies without an understanding of
getting those credited towards the loan because the loan had
changed, the terms of it and now we have a new entity that
owned the assets of H&L, and they purchased those and I was
terribly confused with if I gave it to H&L, was it going into
their account and be used for something else and not credited
towards me [or] should it go to Eckert Seamans to be credited
towards the $80,000.00. And no one would talk to me. . . .
So I made the decision to keep those checks. I kept them in
my desk drawer until late May with no intent on cashing
them.
6
C. The Lawyer Disciplinary Board’s Findings
In June 2009, H&L reported White’s actions to the ODC. In October 2012,
the ODC filed formal charges against White alleging violations of six different Rules of
Professional Conduct.5
The ODC charged that White failed to turn over social security disability
fee checks that belonged to H&L and failed to keep these checks separate until the
dispute with H&L had been resolved, in violation of Rules 1.15(a), (b), and (c). The
ODC also charged White with violating Rules 8.4(c) and (d) by converting property that
belonged to H&L, thereby engaging in conduct that was prejudicial to the administration
of justice involving dishonesty, fraud, deceit, or misrepresentation.
The Board heard the matter in May 2013. It found that White violated
Rules 1.15(b) and (c) when he withheld and subsequently cashed some of the fee checks.
However, the Board found that White did not violate Rule 1.15(a) because the social
security disability fees were subject to a bona fide business dispute, and the Board was
not convinced that these fees belonged solely to H&L. The Board also found that White
had a reasonable understanding that these fees would be split with H&L and credited
against the loan.
5
One of the charges the ODC asserted against White was that he violated Rule
3.4(c) because he knowingly failed to honor the agreed upon terms of a settlement
agreement that arose out of civil litigation between White and H&L. However, the ODC
now concedes that it cannot meet its burden to prove that White violated Rule 3.4(c), and
Rule 3.4(c) is no longer at issue in this case.
7
Likewise, the Board determined that White did not violate Rules 8.4(c) or
(d) because he did not affirmatively misrepresent his receipt of the funds or convert the
social security disability fees.6 The Board also considered Hendrickson’s lack of
credibility as a disciplinary hearing witness in its findings.7
Based on these findings, the Board recommends this Court impose the
following sanctions on White: a reprimand, that he complete an additional six hours of
continuing legal education with a focus on law office management and legal ethics, and
that he be required to pay the costs of the disciplinary proceedings. The ODC now
challenges the Board’s findings that White did not violate Rules 1.15(a), 8.4(c), and
8.4(d), and it argues that White’s license to practice law should be annulled.
II.
STANDARD OF REVIEW
The standard of review of a decision by the Board is as follows:
A de novo standard applies to a review of the
adjudicatory record made before the Committee on Legal
Ethics of the West Virginia State Bar as to questions of law,
questions of application of the law to the facts, and questions
6
We caution that a lawyer who converts funds belonging to a third party may
violate Rules 8.4(c) or (d) even if the lawyer does not affirmatively misrepresent his or
her possession of the funds. See Lawyer Disciplinary Bd. v. Ford, 211 W.Va. 228, 230,
564 S.E.2d 438, 440 (2002).
7
For example, the Board found the following facts indicative of Hendrickson’s
lack of credibility: (1) that Hendrickson initially claimed that White had no written
employment contract with the firm, but he later introduced the March 25, 2008, letter as
evidence of an employment contract; and (2) that he presented no evidence that anyone at
the firm told White that he would have no interest in the social security disability fees.
8
of appropriate sanctions; this Court gives respectful
consideration to the Committee’s recommendations while
ultimately exercising its own independent judgment. On the
other hand, substantial deference is given to the Committee’s
findings of fact, unless such findings are not supported by
reliable, probative, and substantial evidence on the whole
record.
Syl. Pt. 3, Comm. on Legal Ethics v. McCorkle, 192 W.Va. 286, 452 S.E.2d 377 (1994).
Even though we give substantial deference to the Board’s factual findings,
this Court is the “final arbiter of legal ethics problems and must make the ultimate
decisions about public reprimands, suspensions or annulments of attorneys’ licenses to
practice law.” Syl. Pt. 3, Comm. on Legal Ethics v. Blair, 174 W.Va. 494, 327 S.E.2d
671 (1984). Furthermore, the ODC must prove its allegations against White by clear and
convincing evidence. See Syl. Pt. 1, in part, Lawyer Disciplinary Bd. v. McGraw, 194
W.Va. 788, 461 S.E.2d 850 (1995) (citing to Rule 3.7 of the Rules of Lawyer
Disciplinary Procedure).
III.
DISCUSSION
The ODC argues that the Board erred in finding that White did not violate
Rules 1.15(a), 8.4(c), and 8.4(d). The ODC asserts that the Board should have found that
White violated these rules and should have recommended that White’s license be
annulled. However, we accept the Board’s findings because the ODC has not presented
clear and convincing evidence that White violated Rules 1.15(a), 8.4(c), or 8.4(d).
Further, we adopt the Board’s recommended sanctions.
9
A. Rules 1.15(a), (b), and (c)
The ODC argues that it is inconsistent for the Board to find that White
violated Rules 1.15(b) and (c), but not Rule 1.15(a). We disagree with the ODC because
paragraph (a) pertains to a different class of property than that covered by paragraphs (b)
and (c).
In general, Rule 1.15 imposes duties upon lawyers for the safekeeping of
the property of others. Rule 1.15(a) pertains to property belonging solely to a third party,
someone other than the lawyer. Rule 1.15(a) states, in pertinent part, with emphasis
added, “A lawyer shall hold property of clients or third persons that is in a lawyer’s
possession in connection with a representation separate from the lawyer’s own property.”
Rules 1.15(b) and (c), however, pertain to property in which both the lawyer and another
party may have an interest. Rule 1.15(b) says, in part:
Upon receiving funds or other property in which a
client or third person has an interest, a lawyer shall promptly
notify the client or third person. . . . [A] lawyer shall promptly
deliver to the client or third person any funds or other
property that the client or third person is entitled to receive[.]
Rule of Prof’l Conduct 1.15 [2010] (emphasis added). Likewise, Rule 1.15(c) says, in
part, with emphasis added: “When in the course of representation a lawyer is in
possession of property in which both the lawyer and another person claim interests, the
property shall be kept separate by the lawyer.”
In this case, the ODC needed to show clear and convincing evidence that
White violated Rule 1.15(a) by mishandling property that belonged solely to someone
10
else. The Board found that the ODC failed to meet this burden because ownership of the
social security disability fees was reasonably in dispute and may have partly belonged to
White. After reviewing the unique facts of this record, we are likewise not convinced
that White violated Rule 1.15(a).
H&L created an ambiguous employment letter that was unclear as to the
application of the social security disability fees from White’s cases against his loan. The
fact that H&L caused the ambiguity as to whether these fees would be credited against
White’s loan is one reason we are not convinced that White violated Rule 1.15(a). See
Lee v. Lee, 228 W.Va. 483, 487, 721 S.E.2d 53, 57 (2011) (“‘[I]n case of doubt, the
construction of a written instrument is to be taken strongly against the party preparing
it.’”) (quoting Henson v. Lamb, 120 W.Va. 552, 558, 199 S.E. 459, 461-62 (1938)).
Furthermore, H&L waited until White had quit his former job and been working at H&L
for six months before unilaterally changing White’s employment terms with the Line of
Credit Promissory Note. There was no attempt to mutually agree on the loan terms as
provided in the employment letter. There is also no evidence that anyone at H&L
explained to White that H&L would not credit the social security disability fees against
his loan.
The Board found White’s interpretation of the agreement to be reasonable.
For example, it considered the fact that White’s “salary” plus his “loan” equaled
$160,000, the exact amount White testified that he told H&L was the minimum pay for
which he would work. By contrast, the Board found H&L’s position to be less plausible
11
because White would have no incentive to leave a job where he made $160,000 per year
to make half that much.
Another jurisdiction applied the same logic as the Board when, in
substantially the same factual scenario, it found a lawyer to have violated the Wisconsin
equivalents to our Rules 1.15(b) and (c), but to have not violated Rule 1.15(a). See In re
Disciplinary Proceedings against Gende, 344 Wis. 2d 1, 6-14, 821 N.W.2d 393, 396-99
(2012) (lawyer kept proceeds in his desk drawer from his law firm pursuant to a
“colorable claim” over ownership of the fees).
Under the limited facts of this case, where a lawyer kept property from a
third party that was subject to a bona fide business dispute, and to which the lawyer
reasonably believed he was entitled, the Board was correct in its findings that White
violated Rules 1.15(b) and (c), but did not violate Rule 1.15(a). We find no basis to set
aside the Board’s findings.8
8
We caution that our holding in this case does not mean that a lawyer can
withhold disputed property and negate a Rule 1.15(a) violation by stating a groundless
belief that they were entitled to do so. Rather, the dispute must be bona fide, and the
belief must be reasonable. This Court has found Rule 1.15(a) violations when a lawyer
withheld a third person’s property subject to an unreasonable “dispute.” See, e.g.,
Lawyer Disciplinary Bd. v. Martin, 225 W.Va. 387, 395-96, 693 S.E.2d 461, 469-70
(2010) (“While [Mr. Martin] argues he performed sufficient work for the fee, the record
does not support this assertion.”); Comm. on Legal Ethics v. Hess, 186 W.Va. 514, 517,
413 S.E.2d 169, 172 (1991) (“Mr. Hess attempts to characterize his conversion of the
funds as an internal business disagreement. There is nothing in the record to reflect
this.”).
12
B. Rules 8.4(c) and (d)
The ODC argues that White violated Rules 8.4(c) and (d) by converting
funds to his own use that belonged to H&L. Rule 8.4 provides, in pertinent part, that a
lawyer may not (c) “engage in conduct involving dishonesty, fraud, deceit or
misrepresentation;” or (d) “engage in conduct that is prejudicial to the administration of
justice[.]” Rule of Prof’l Conduct 8.4 [1995].
This Court is satisfied with the Board’s findings that White did not violate
Rules 8.4(c) or (d) because he did not convert funds belonging solely to H&L and
because he reasonably believed that he had a legitimate claim to the social security
disability fees. This Court defines conversion as “the unauthorized use of entrusted funds
for the lawyer’s own purpose.” Lawyer Disciplinary Bd. v. Kupec, 202 W.Va. 556, 571,
505 S.E.2d 619, 634 (1998). In Kupec, we specified that “[c]onversion occurs when a
lawyer intentionally takes or uses client [or third party] funds for his own or the law
firm’s use.” Kupec, 202 W.Va. at 571, 505 S.E.2d at 634 (quoting ABA/BNA Lawyers’
Manual on Prof’l Conduct § 45:501 [1993]).
The ODC did not offer clear and convincing proof that H&L solely and
indisputably owned the social security disability funds, and therefore, failed to establish
White converted the fees within the context of Rule 8.4. We are therefore satisfied that
White did not violate Rules 8.4(c) or (d).
13
C. Sanctions
The Rules of Lawyer Disciplinary Procedure set out the guidelines for
disciplining lawyer misconduct. Rule 3.15 allows this Court to impose the following
sanctions: (1) probation, (2) restitution, (3) limitation on the nature or extent of future
practice, (4) supervised practice, (5) community service, (6) admonishment, (7)
reprimand, (8) suspension, or (9) annulment. Office of Disciplinary Counsel v. Rogers,
231 W.Va. 445, 448 n.1, 745 S.E.2d 483, 486 n.1 (2013). Rule 3.15 also allows this
Court to impose payment of the costs of the disciplinary proceeding. Rogers, 231 W.Va.
at 448 n.1, 745 S.E.2d at 486 n.1. Furthermore, Rule 3.16 requires us to consider the
following factors in determining the appropriate punishment for misconduct:
(1) whether the lawyer has violated a duty owed to a client, to
the public, to the legal system, or to the profession; (2)
whether the lawyer acted intentionally, knowingly, or
negligently; (3) the amount of the actual or potential injury
caused by the lawyer’s misconduct; and (4) the existence of
any aggravating or mitigating factors.
Syl. Pt. 4, Office of Lawyer Disciplinary Counsel v. Jordan, 204 W.Va. 495, 513 S.E.2d
722 (1998).
As to the first factor, we are satisfied with the Board’s finding that White
violated a duty to the profession, but not to a client, the legal system, or the public. See
Lawyer Disciplinary Bd. v. Ford, 211 W.Va. 228, 230, 564 S.E.2d 438, 440 (2002)
(holding lawyer did not breach a duty to a client, the legal system, or the public when he
knowingly failed to turn over the fee checks that indisputably belonged to his firm). In
regards to the second factor, neither party disputes that White acted knowingly and
14
intentionally. Thirdly, this Court affirms the Board’s finding that there was no actual
injury. This was a dispute between an associate and his law firm, and as the Board noted,
the issue of whether there were any firm monies lost was an issue that was settled in
H&L’s civil litigation against White.
Finally, we consider whether any aggravating or mitigating factors were
present. Aggravating factors are those that “may justify an increase in the degree of
discipline to be imposed.” Syl. Pt. 4, Lawyer Disciplinary Bd. v. Scott, 213 W.Va. 209,
579 S.E.2d 550 (2003). By contrast, mitigating factors are those that “may justify a
reduction in the degree of discipline to be imposed.” Syl. Pt. 2, Scott. We said in
Syllabus Point 3 of Scott that this Court may consider the following as mitigating factors:
(1) absence of a prior disciplinary record; (2) absence of a
dishonest or selfish motive; (3) personal or emotional
problems; (4) timely good faith effort to make restitution or to
rectify consequences of misconduct; (5) full and free
disclosure to disciplinary board or cooperative attitude toward
proceedings; (6) inexperience in the practice of law; (7)
character or reputation; (8) physical or mental disability or
impairment; (9) delay in disciplinary proceedings; (10)
interim rehabilitation; (11) imposition of other penalties or
sanctions; (12) remorse; and (13) remoteness of prior
offenses.
We agree that the following facts should mitigate White’s punishment: the
application of social security disability fees against the loan was the subject of a bona
fide contract dispute, White had no prior disciplinary record, he lacked experience in the
legal profession, and White lacked a dishonest or selfish motive. This Court also agrees
15
with the Board that there are no aggravating factors in this case, and on this record, we
cannot clearly say that White acted with a dishonest or selfish motive.
This case is fundamentally different from those in which a lawyer
knowingly misappropriated a third person’s property. See Syl. Pt. 5, Office of
Disciplinary Counsel v. Jordan, 204 W.Va. 495, 513 S.E.2d 722 (1998). See also,
Comm. on Legal Ethics v. Hess, 186 W.Va. 514, 413 S.E.2d 169 (1991) (applying general
rule that conversion warrants disbarment of lawyer who misappropriated funds belonging
to his firm). Here, White reasonably believed, pursuant to a bona fide business dispute,
that the social security disability fees were supposed to have been credited against his
loan under his employment agreement with H&L.9 We find the Board’s findings as to
White’s violations and the appropriate sanctions to be satisfactory.
IV.
CONCLUSION
This Court concludes that White violated Rules 1.15(b) and (c), and we
accept the Board’s findings that White did not violate Rules 1.15(a), 8.4(c), or 8.4(d).
We order that White (1) be reprimanded, (2) that he be ordered to take an additional six
hours of Continuing Legal Education with a focus on law office management and ethics,
and (3) that he be ordered to pay the costs of the disciplinary proceeding.
Reprimand and other sanctions.
9
We wish to make clear that we are not, through the issuance of this opinion,
endorsing a lawyer’s decision to resort to self-help whenever a dispute between the
lawyer and his or her firm arises over a poorly drawn employment agreement.
16