On Report and Recommendation of the Board on Professional Responsibility (BDN 473-97)
Before Schwelb and Washington, Associate Judges, and Ferren, Senior Judge
The opinion of the court was delivered by: Ferren, Senior Judge
Concurring opinion by Associate Judge SCHWELB at p. 14.
The Board on Professional Responsibility has recommended that we disbar respondent, Hendrith V. Smith, from practicing law in the District of Columbia. The proposed discipline is premised on Hearing Committee findings, accepted by the Board, that respondent had violated two Rules of Professional Conduct: Rule 1.15 (a) (commingling and misappropriation), and Rule 1.17 (a) (failure to designate trust or escrow account). Contrary to the Hearing Committee's ultimate finding, however, the Board concluded that respondent's misappropriation of client funds was reckless, not merely negligent, and thus warrants disbarrment, not the one-month suspension recommended by the Hearing Committee. On this record we must agree with the Board and order disbarrment.
Respondent was sworn in to the District of Columbia Bar on January 6, 1997. The following month, in opening his own, solo law practice, he established two accounts at Nations Bank: a business checking account and an IOLTA (trust) account. Five months later, respondent took on an automobile personal injury lawsuit for plaintiff Salha Saleh, a client referred by Roberta Wright, Esquire after Wright had executed on Saleh's behalf an Assignment and Authorization (A & A) agreement *fn1 with a medical provider, Neurodiagnostic Associates. After negotiating a recovery for Saleh, respondent deposited the settlement check for $2,920.36 (which Saleh had endorsed) in his business checking account on September 15, 1997. Included in that amount was an unquestioned attorney's fee of $972.47, leaving $1,947.89 allocable to Saleh.
To fulfill the A & A agreement, respondent sent Neurodiagnostic a check on Saleh's behalf dated October 23, 1997 for $1,220. By October 30 Neurodiagnostic had not received the check, but told respondent to wait for awhile before issuing a new one in order to see whether the check would arrive. After several weeks the check apparently had been lost. Respondent issued another on December 4, which Neurodiagnostic deposited on December 12. The check cleared.
On the day he wrote the first check, October 23, respondent also wrote Saleh to say that he had paid Neurodiagnostic $1,220. He included a copy of the check. Saleh became angry that respondent had paid Neurodiagnostic, because she had been pressuring him to give the settlement funds to her while promising that she would pay the medical bills herself. Respondent initially believed - as the Hearing Committee and Board found - that he was duty-bound to pay the other medical providers in full rather than sending Saleh the money to pay them (as he believed she would) "on an installment basis." After conferring with referral attorney Wright, however, respondent decided that it would be appropriate to send Saleh $727.89 - the account balance remaining after payment of his fee and Neurodiagnostic's bill - while expressing his expectation that Saleh would pay the rest of her medical bills. Respondent mailed a check for that amount on October 29; Saleh deposited it on November 18; and that check also cleared. *fn2
During the period between September 15, 1997, when respondent deposited the settlement check, and December 12, 1997, when the checks issued to Saleh and Neurodiagnostic, respectively, had been deposited and cleared, respondent wrote checks for business and personal expenses that caused his business account - containing the settlement funds - to fall on many days considerably below the amount required to cover his client's entrusted funds. Specifically, within two days of the settlement check deposit, respondent's business account dipped to $1,611.01, well below the $1,947.89 (representing settlement proceeds net of legal fee) that respondent was obliged to hold for Saleh's benefit. Thereafter, between September 17 and October 14, 1997, a period before respondent issued checks to Neurodiagnostic and Saleh, the account balance fluctuated between $249.54 and $1,794.48. During this period when the account continuously was under the client's $1,947.89, respondent inquired of the bank seven times for his account balance. These repeated inquiries establish, as the Board found, that respondent knew he was using settlement proceeds for personal purposes, since the bank would have reported balances well below $1,947.89 before respondent had begun to disburse any client funds.
Next, between October 23 and November 17, a period during which respondent's checks to Neurodiagnostic, then Saleh, for $1,220 and $727.89, respectively, were outstanding, the account held balances ranging from -$673.09 to $1,295.74, substantially below the $1,947.89 required to cover the two client-related checks. More specifically, on October 29, six days after issuing the first check to Neurodiagnostic, respondent wrote a check to Saleh for the remaining $727.89. That day, as well as the day before (October 28), he inquired as to his account balance, which ranged during that two-day period between $270.74 and $922.08 - not nearly enough to cover both the Neurodiagnostic and Saleh checks. Nor was the account sufficient to cover both checks four days later, on November 2, the date Saleh received her check in the mail. Furthermore, even with the first Neurodiagnostic check outstanding, bank records in evidence show that if Saleh had tried to deposit her check between November 5 and 17, 1997, the account would have been insufficient to cover her $727.89.
The Board found, moreover, that respondent knew his business account was below the amount he was required to hold in trust because his inquiries of the bank, almost daily, would have revealed "on at least some occasions" that the balance was insufficient to cover the entrusted funds. The bank statements in the record confirm this finding; during the period between October 20 and November 1, respondent made eleven inquiries, one of which would have shown a negative account balance and all of which would have disclosed a balance below $1947.89. In particular, the inquiry on October 21, 1997, two days before respondent wrote the first $1,220 check to Neurodiagnostic, showed only $1,273.56 in the account. Although this would have been enough to cover the $1,220, the balance remaining - $53.56 - was far below the $727.89 necessary to pay Saleh's other medical providers. And between October 31 and November 17, 1997, the first $1,220 check would have bounced if Neurodiagnostic had found and presented it, because the account balance during that period had fallen below that amount.
Finally, after Saleh deposited (and thus cashed) her check on November 18, 1997, respondent's business account retained funds insufficient to cover the $1,220 still owed to Neurodiagnostic. Specifically, between November 26 and December 1, the account held from $561.94 to $980.57, and between December 5 and 8, the balance ranged from -$747.63 to $1,152.37. Respondent's December 4 check to Neurodiagnostic thus cleared only because it was deposited later, on December 12.
The Hearing Committee and the Board rejected Bar Counsel's charge of dishonesty, as do we. *fn3 As to the principal charges, however, the Hearing Committee found culpability, in particular commingling and misappropriation of settlement funds in violation of Rules 1.15 (a) *fn4 and 1.17 (a). *fn5 As to commingling, the Committee found that respondent had believed - mistakenly - that because the settlement money was owed to third party medical providers, the Rules of Professional Conduct did not require him to deposit the settlement check in his IOLTA (trust) account. As to misappropriation, the Committee determined that respondent's insufficient balances - reflecting personal use of the settlement funds - had resulted from poor accounting practice: relying solely on periodic bank inquiries rather than maintaining a detailed ledger tracking the account balance. Based on respondent's mistaken understanding of the commingling rule and on his poor record-keeping that, taken together, caused an "accidental misappropriation," the Hearing Committee concluded that respondent's Rules violations were no worse than negligent. ...