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In re Cloud

December 28, 2007; as Amended March 13, 2008


The opinion of the court was delivered by: Terry, Senior Judge

On Report and Recommendation of the Board on Professional Responsibility BDN 141-97 & 74-98.

Argued March 7, 2003

Before GLICKMAN, Associate Judge, and WAGNER and TERRY, Senior Judges.*fn1

Respondent, Eric Cloud, is a member of the District of Columbia Bar. In 1997 a complaint was filed with the Office of Bar Counsel alleging that Mr. Cloud had failed to pay funds which he held in trust from a personal injury settlement. After an investigation by Bar Counsel, a hearing committee found that Mr. Cloud had violated Rules 1.15 and 1.17 of the District of Columbia Rules of Professional Conduct.*fn2 In light of its findings, the hearing committee recommended that Mr. Cloud be suspended from the practice of law for one year, with six months stayed. Bar Counsel filed exceptions to the hearing committee's report. The Board on Professional Responsibility ("the Board"), after hearing oral argument and considering briefs filed by the parties, found that Mr. Cloud had not engaged in dishonesty, nor had he violated any ethical rules requiring the maintenance of financial records, but that he had engaged in reckless misappropriation of certain entrusted funds. Consequently, the Board recommended that he be disbarred. Both Bar Counsel and Mr. Cloud filed exceptions to the Board's report and recommendation. We accept that recommendation and order Mr. Cloud's disbarrment.


A. The Settlement

In March 1993 Mr. Cloud was retained by Kimberly Dean to represent her in a civil action against General Elevator Company arising out of injuries she sustained while riding in an elevator in an office building in downtown Washington. Before Ms. Dean retained Mr. Cloud, she filed a workers' compensation claim against her employer because her injuries were job-related. Kemper Insurance Company, her employer's workers' compensation carrier, paid Ms. Dean $23,802.89 on her claim, thereby acquiring a statutory lien on any award recovered in her civil action against General Elevator.*fn3 When Ms. Dean accepted a $24,000 settlement offer from General Elevator in April 1993, Kemper and Mr. Cloud agreed that Kemper would receive $10,254.93 in exchange for a waiver of its rights to go after any other funds.*fn4

On May 3, 1993, General Elevator issued two checks to Mr. Cloud totaling $24,000, which he deposited in his attorney escrow account. Then, in August 1993, a formal settlement agreement was signed by Ms. Dean, Mr. Cloud, and a representative of Kemper which memorialized the parties' earlier understanding that Kemper was entitled to a portion of the settlement from General Elevator. The settlement agreement was forwarded to the District of Columbia Office of Workers' Compensation for its review and approval. As part of the approval process, Mr. Cloud received a letter from Kemper's attorney, Marvin Andersen, dated October 4, 1993, along with a form entitled "Approval of Compromise of Third-Person Cause of Action." With respect to that form, Mr. Andersen's letter stated:

Please calculate what the net amount was to your client. I understand that to mean the third-party settlement minus the litigation expenses, minus attorney's fees and minus the amount paid to Kemper for release of the lien. I would like to make a footnote to that final figure to the effect that Kemper is waiving its credit for temporary total disability overpayment of $5,311.90. This makes the final agreement more favorable to your client. [Emphasis added.]

The italicized sentence referred to a provision in the settlement agreement between Ms. Dean and Kemper, pursuant to which Kemper had compromised its claim for the return of excess disability benefits that had been paid to Ms. Dean. However, when Mr. Cloud filled out and returned the settlement form, he misunderstood the sentence to mean that Kemper had decided to reduce its negotiated lien of $10,254.93 by an additional $5,311.90 (i.e., to $4,943.03). On the basis of this misunderstanding, Mr. Cloud distributed an additional $3,311 to Ms. Dean and took an additional $2,000 as his fee.*fn5

Two months later, after the Office of Workers' Compensation formally approved the settlement, Mr. Andersen wrote a letter to Mr. Cloud seeking the full $10,254.93. Only then, in December 1993, did Mr. Cloud learn that he had misread the letter of October 4 and had made a mistake in disbursing the $5,311 to Ms. Dean and himself. Mr. Cloud acknowledged his mistake to Mr. Andersen and, on February 4, 1994, sent a check for $5,943.03 to Kemper in partial payment of its lien. The check covered the $4,943.03 that Mr. Cloud mistakenly thought he owed, plus $1,000 of the approximately $2,000 in fees that Mr. Cloud had withdrawn in error.

In order to pay the balance due to Kemper, Mr. Cloud sought to recover from Ms. Dean the $3,311 he had overpaid her, but she refused to return any of that money. Mr. Cloud then promised Kemper that he would pay her portion of the amount due in addition to the remaining $1,000 in fees that he had taken by mistake. In May of 1994, Mr. Cloud sent Kemper an additional check for $500, which brought the balance due down to $3,811.90, but for many months thereafter he made no further payments.

When asked during the hearing to explain why he did not pay Kemper the full amount due, Mr. Cloud testified that he did not have any money. In April 1994, however, he had made two deposits in his operating account of $29,543 and $143,675. When pressed to explain why he did not use those funds to pay Kemper, Mr. Cloud did not have an explanation. However, he had testified earlier that initially he thought that Kemper had caused the error, and that Kemper therefore would have to wait while he tried to get Ms. Dean to return the money before he paid it himself.

As a result of Mr. Cloud's failure to pay, Mr. Andersen filed suit on behalf of Kemper seeking the balance owed, plus interest. On December 1, 1995, Mr. Cloud entered into a consent order with Kemper in which he agreed to pay $3,811.90 by June 1, 1996. If he failed to do so, the consent order provided that Kemper could obtain a judgment against him for that amount, plus interest, costs, and attorney's fees. When Mr. Cloud failed to pay the agreed-upon sum, Mr. Andersen obtained a consent judgment for $4,370.78. Mr. Cloud testified before the hearing committee that during the time he was supposed to be paying Kemper in accordance with the consent order, he could not work for several weeks because of medical problems and was also experiencing extreme financial strain in his law practice.

In March 1997, as a result of Mr. Cloud's continued failure to make full payment, Mr. Andersen brought his conduct to the attention of Bar Counsel. Just before the start of his disciplinary hearing, Mr. Cloud ...

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