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Opinions – 2/21/13: Maryland Court of Appeals

Professional Responsibility


BOTTOM LINE: Disbarment was the appropriate sanction where attorney violated Title 16 of the Maryland Rules and many of the Maryland Lawyers’ Rules of Professional Conduct, including those involving the mishandling and misappropriation of client funds.

CASE: Attorney Grievance Commission of Maryland v. Paul Winston Gardner II, Misc. Docket AG No. 74, Sept. Term, 2011 (filed Feb. 11, 2013) (Judges Harrell, Battaglia, Greene, Adkins, Barbera, McDonald & CATHELL (retired, specially assigned)). RecordFax No. 13-0211-20, 32 pages.

FACTS: The Attorney Grievance Commission of Maryland (AGC), acting through Bar Counsel, was notified by a financial institution that Paul Winston Gardner’s trust account had been overdrawn. Bar Counsel then began an investigation of Gardner’s trust account, which led to complaints concerning the representation of Steve Kang and Vivian Boyd.

With respect to Bar Counsel’s original complaint, on four occasions, Gardner paid his office manager, Rosalind Tyner, a total of $700 in administration fees with checks drawn on his attorney trust account for Ms. Tyner’s for work on personal injury cases. Ms. Tyner was not a lawyer, and Gardner’s fee agreements did not state that he would be sharing legal fees with Ms. Tyner from the portion of the settlement proceeds that were collected as attorney’s fees.

In September 2009, another attorney presented a check drawn on Gardner’s trust account in the amount of $2,500 for payment. The account did not contain sufficient funds at the time of presentation. This caused an overdraft in Gardner’s trust account.

Gardner also deposited a Personal Injury Protection (PIP) check on behalf of a client in the amount of $2,500 which left a balance of $1,577 in Gardner’s trust account. Gardner made two cash withdrawals from his trust account. The second withdrawal left a balance of $27.83. Gardner failed to keep his client’s funds in trust prior to disbursement.

Acting as an agent of Mingshu Li, Steve Kang hired Gardner to prepare and file a non-immigrant visa application for Mrs. Li’s husband. The application was denied because it did not contain sufficient information about the company Li wanted to invest in and because there was nothing to show the money committed to be invested in the company. Gardner waited several months to inform Mrs. Li that the funds had to be invested in the company prior to refiling the visa petition. Mrs. Li transferred the funds to be invested. However, Gardner never refiled the visa application.

Mr. Kang also retained Gardner to represent Mr. Kang’s contracting company in a mechanic’s lien case. After filing the case, however, Gardner did not perform any work on the case and it was dismissed due to lack of prosecution.

There were several other matters that Kang hired Gardner to handle. Gardner did not send regular invoices for any of Mr. Kang’s legal matters. Gardner did not maintain a separate record of fee payments for each matter, and routinely listed fee payments on invoices without designating the matter for which the requested payment was made.

In February 2010, Gardner was retained by Vivian Boyd and her son, Christopher ‘AG’ Holden. AG was an aspiring rapper who had a promising career in the music industry. Gardner was to earn $250 per hour to be billed monthly. Gardner received a $5,000 payment from Ms. Boyd and deposited it into his trust account as a retainer for legal services.

Gardner suggested to Ms. Boyd that they contact Michael ‘Blue’ Williams, a manager in the recording industry, to help facilitate contact with Rick Ross — apparently, an established rap singer. Mr. Williams quoted a price of $25,000 to get Rick Ross to perform a song with AG. Ms. Boyd, using her home as collateral, secured a loan in the amount of $25,000. Ms. Boyd deposited $25,000 into Gardner’s trust account.

Gardner gave Williams $12,500. However, no contract or agreement memorializing that the funds were transferred was executed. The parties never signed a contract or recording agreement with Rick Ross. Mr. Williams ceased communication with Gardner in June 2010.

Over the next few months, Gardner withdrew funds from his trust account, allegedly for the representation of Ms. Boyd and AG.

After Ms. Boyd realized Gardner would not be able to help her and AG, she emailed Gardner about returning the remaining money that was supposed to go to Rick Ross. Gardner eventually returned $4,500 to Ms. Boyd, but could not explain what happened to the rest of the money. Consequently, Ms. Boyd’s investors foreclosed and her house was taken away. She died of cancer shortly thereafter.

Bar Counsel filed a petition for disciplinary or remedial action in which it asserted that Gardner violated Title 16 of the Maryland Rules (dealing with attorney trust accounts) and several of the Maryland Lawyers’ Rules of Professional Conduct (MRPC).

The Court of Appeals disbarred Gardner.

LAW: Rule 16-759(b) provides that, if no exceptions to findings of fact are filed, the Court may treat the findings of fact as established for the purpose of determining appropriate sanctions.

With respect to Bar Counsel’s complaint, the hearing judge concluded that Gardner had violated: MRPC 1.15(a) in respect to the PIP check; MRPC 5.4(a) in writing the four checks from the trust account to Ms. Tyner; MRPC 8.4(a) by violating MRPC 1.15(a) and 5.4(a); and MRPC 8.4(c) by engaging in conduct involving dishonesty, fraud, deceit or misrepresentation.

Gardner did not except to any of these conclusions or to the findings of fact.

The hearing judge also concluded, based upon her findings of fact, that Gardner had violated various provisions of Title 16 of the Maryland Rules, including Rule 16-606.1(a), which requires a lawyer to create and maintain records for all attorney trust accounts. The hearing judge also found that Gardner failed to reconcile his attorney trust account on a monthly basis, violating Rule 16-606.1(b). Gardner took no exception to this conclusion of law and, therefore, Gardner violated these rules.

The hearing judge concluded that Gardner had made or authorized cash withdrawals from his trust account and, by issuing a check for $2,500 to another attorney, had permitted his trust account to have a negative balance. Such actions violated the provisions of Rule 16-609.

With respect to the matters involving Mr. Kang, the hearing judge concluded that Gardner did not possess the requisite knowledge or even a basic level of competence necessary to handle the immigration matter for which he was retained. Furthermore, Gardner never re-filed the immigration application after obtaining the necessary information. Gardner generated incomprehensible billing statements and demonstrated an absence of knowledge, skill, thoroughness and preparation in the area of billing practices and did not regularly bill Mr. Kang.

Based upon a de novo review of the evidence, there was credible, clear and convincing evidence supporting the judge’s determination that Gardner violated MRPC 1.1.

MRPC 1.3 states “A lawyer shall act with reasonable diligence and promptness in representing a client.” The hearing judge found that Gardner failed to act in a prompt and diligent manner by waiting three months to contact Mr. Kang about the information he needed to complete the visa application and by not timely refiling the visa application. Furthermore, Gardner’s deficiencies in the mechanic’s lien case constituted a violation of MRPC 1.3.

The trial court concluded that, as a matter of law, Gardner violated MRPC 1.4(a)(1), 1.4(a)(2) and 1.4(b) because he did not adequately communicate to Mr. Kang what he was doing with his various cases and the status of each. Gardner filed an exception to this conclusion, stating that he communicated with Mr. Kang via email, fax, mail, and in person.

The hearing judge has the primary role in assessing the credibility of the witnesses. She chose to credit Mr. Kang’s testimony over that of Gardner. The hearing judge was not erroneous in making this conclusion of law. Thus, Gardner’s exception was overruled.

The hearing judge also held that Gardner violated the provisions of MRPC 1.5 as to the reasonableness of his fees. She found that, while $250 per hour is not facially excessive, Gardner’s failure to follow through on many of Kang’s legal matters made the fees charged unreasonable.

MRPC 1.5(b) also mandates that the basis of the fee must be communicated to the client prior to, or within a reasonable time after, the onset of representation. Gardner did not communicate the scope of the representation or the basis for his fee for each of Mr. Kang’s distinguishable legal matters. There was sufficient evidence to support the hearing judge’s conclusion. Gardner’s exception to this conclusion was overruled.

Furthermore, ass a matter of law, the representation of Mr. Kang and Mrs. Li was a conflict of interest and violated MRPC 1.7. The representation of both involved the same subject matter-the business of bringing a branch of the Yanbian Company and its officers to the United States. Gardner was advised that he had a potential conflict of interest, and did not withdraw his appearance until, on the eve of trial, a motion was made to strike his appearance.

Gardner took no exception to the conclusion that he violated MRPC 1.16 because he did not accurately account for all of Kang’s fee payments and did not refund any of the fees collected.

Gardner also took no exception to the hearing judge’s conclusions that he violated MRPC 8.4(a) and 8.4(d).

Attorneys violate MRPC 1.1 “when they fail to handle a client matter with `lawyerly skill and ability’.” Gardner made significant payments to individuals without adequately protecting the interests of Ms. Boyd and AG, in violation of MRPC 1.1.

MRPC 1.4(a)(2) requires lawyers to keep their clients informed in a reasonable manner. The evidence before the hearing judge indicated that there were numerous unanswered communications from the Boyd interests in reference to Gardner as to the moneys at issue without an adequate response. This constituted a violation of MRPC 1.4(a)(2). See Attorney Grievance Commission v. Kreamer, 404 Md. 282 (2008). Furthermore, Gardner violated MRPC 1.4(a)(2) by not timely disclosing the $1,000 payment to Mr. Williams.”

Gardner also violated MRPC 1.4(b). Gardner should have warned Ms. Boyd and AG of the potential danger in making a cash payment without the existence of a contract. The hearing judge’s conclusion was amply supported by clear, convincing and credible evidence.

Gardner billed his general fee rate for performing non-legal services such as escorting his clients to Washington D.C. Billing for non-legal services because those services compromised the time an attorney could expend on legal matters, could, under some circumstances, be permitted, but only when there is “‘some kind of effective disclosure to the client as part of the terms of the engagement’.” Attorney Grievance Commission v. Wright, 306 Md. 93, 104 (1986). The hearing judge concluded that Gardner never made any such disclosure to his clients, and billed ten hours when he spent at most three hours with them. This fee was unreasonable. Accordingly, Gardner violated MRPC 1.5.

Under MRPC 1.5(a), attorneys must hold their client funds in a separate trust account and create and maintain proper accounts. Gardner violated MRPC 1.5(a) because, as the hearing judge concluded, he only performed two hours of billable work in respect to the retainer of $5,000 on behalf of Ms. Boyd and AG. Thus he should have been holding $4,500 in his trust account, but the balance of the trust account at the end of February 2010 was $98.38. He also used funds from his trust account to pay a Verizon bill. Finally, he made a $1,000 disbursement to Mr. Williams in respect to the Rick Ross matter (in addition to the $12,000 cash disbursement previously made from the $25,000) without telling his clients, and did not note it on the retainer ledger until December 10, 2010.

The hearing judge properly concluded that Gardner violated MRPC 1.16 (d) because he did not take reasonable steps to protect Ms. Boyd and AG’s interests. He also failed to return the unearned portion of the trust balance and he billed for work that was done after the termination of his representation.

Gardner also violated the provisions of MRPC 8.4(a) by committing the numerous other violations of the rules in the representation of these clients. Gardner did not maintain accurate client matter records for either the $5,000 retainer or the $25,000 trust deposit.

The hearing judge properly concluded that Gardner violated Rule 16-606.1(a) by reason of his failure to maintain said records.

Rule 16-609 prohibits an attorney from making cash withdrawals from a trust account. Gardner made seven cash withdrawals in addition to the $12,500 cash withdrawal he delivered to Blue Williams in February 2010 totaling $3,650, in violation of Rule 16-609.

There were no credible mitigating factors. An aggravating factor was that Gardner was previously subject to disciplinary consideration and was, about the time that he was committing some of the present violations of the rules, or just prior thereto, actually participating, or had just participated, in a Conditional Diversionary Agreement with the Attorney Grievance Commission. Additionally, Gardner’s conduct resulted in prejudice to his various clients. Gardner also failed to show up for a deposition and was continually late in appearing at the hearings.

COMMENTARY: The purpose of imposing sanctions is to protect the public. Att’y Grievance Comm’n v. Zimmerman, 428 Md. 119, 144 (2012).

Gardner was found to have violated numerous rules, some of which involved serious mishandling of client’s funds, the misappropriation of those funds, withdrawing cash from trust funds, improper billing, improper trust records, conflicts of interest and much more.

“Misappropriation of funds by an attorney is an act infected with deceit and dishonesty and ordinarily will result in disbarment in the absence of compelling extenuating circumstances justifying a lessor sanction.” Att’y Grievance Comm’n v. Vanderlinde, 364 Md. 376, 410 (2001). See also Zimmerman, 428 Md. at 146.

Accordingly, the sanction was disbarment.