Barbera, C.J. Harrell Battaglia Greene McDonald Rodowsky, Lawrence F. (Retired, Specially Assigned) Cathell, Dale R. (Retired, Specially Assigned), JJ.
Attorney discipline cases that result in disbarment often find the attorney committing one of the seven deadly sins – e.g., greed, lust, sloth. This is not one of those cases. The sin in this case was inattention – inattention to clients, inattention to an attorney trust account, and inattention to the activities of a non-lawyer assistant in whom the attorney misplaced his trust and who misused the attorney trust account to the detriment of the attorney's clients. Sadly, this too merits disbarment, as our regulation of the practice of law must protect the public not only from those attorneys who engage in deliberate, egregious acts of misconduct, but also those who fail to fulfill the routine duties of the profession that serve and safeguard their clients.
A. Procedural Context
The Attorney Grievance Commission ("Commission") charged Earl Americus Smith, III with violating numerous provisions of the Maryland Lawyers' Rules of Professional Conduct ("MLRPC") arising out of the management of his attorney trust account, his delegation of tasks to his non-lawyer assistant, and his handling of several client matters.
Specifically, the Commission charged Mr. Smith with violating MLRPC 1.1 (competence), 1.2(a) (scope of representation), 1.3 (diligence), 1.4 (communication), 1.5(c) (fees), 1.15 (safekeeping property), 5.3 (responsibilities regarding nonlawyer assistants), 5.5(a) (unauthorized practice of law), 8.1(a) (false statement in connection with disciplinary matters), and 8.4(a) (violation of MLRPC), (c) (conduct involving deceit) and (d) (prejudice to the administration of justice). The Commission also charged Mr. Smith with violating Maryland Rules 16-606.1 (attorney trust account record keeping), 16-607 (commingling of funds), and 16-609 (prohibited transactions). The Commission later withdrew the charge as to MLRPC 8.1(a).
Pursuant to Maryland Rule 16-752(a), this Court designated Judge Larnzell Martin, Jr. of the Circuit Court for Prince George's County to conduct a hearing concerning the alleged violations and to provide findings of fact and recommended conclusions of law. Following a three-day hearing at which Mr. Smith testified and was represented by counsel, the hearing judge issued his findings of fact and conclusions of law. On the basis of those factfindings, the hearing judge concluded that Mr. Smith committed all of the alleged violations.
The Commission did not except to the hearing judge's findings and conclusions; it recommended that we disbar Mr. Smith. Mr. Smith conceded most of the violations, but filed an exception to the hearing judge's conclusion that he was responsible for violations of MLRPC 8.4 and argued for a suspension rather than disbarment. The Court heard oral argument on Mr. Smith's exception and the recommendations for sanction in January 2015.
The hearing judge's factual findings are uncontested; we therefore treat them as established. Maryland Rule 16-759(b)(2)(A). The hearing judge's findings, the parties' stipulations, and the undisputed evidence in the record establish the following facts.
Mr. Smith's Law Practice
Mr. Smith was admitted to the Maryland Bar in 1983. He is also a member of the District of Columbia Bar. During 1991, Mr. Smith established a law practice under the name of Bryan & Smith, P.C., which focused on personal injury matters. Since the mid-1990s, Mr. Smith has been the only attorney at the firm. The key facts relevant to the alleged violations concern Mr. Smith's delegation of responsibility to – and failure to supervise – his legal assistant, his mishandling of his attorney trust account related to personal injury cases, and his neglect of several client matters, all during the period 2009-2012.
Delegation of Responsibility to Dawn Staley-Jackson
During 1993, Mr. Smith hired Dawn Staley-Jackson as a paralegal. Ms. Staley-Jackson worked for the firm for the next two decades as a legal assistant. During the time period relevant to the alleged violations, her name appeared on the firm's stationery with the title "Legal Assistant."
Mr. Smith delegated substantial authority to Ms. Staley-Jackson. Indeed, the hearing judge found that he "allowed Ms. Staley-Jackson to run his law practice without any meaningful oversight." With Mr. Smith's knowledge and acquiescence, Ms. Staley-Jackson independently sent demand letters to defendants, negotiated settlements with insurance carriers, communicated with and advised clients, dealt with medical providers, drafted pleadings and other papers for filing in court (frequently signing Mr. Smith's name), and deposited checks.
Mr. Smith gave Ms. Staley-Jackson responsibility for preparing settlement disbursement sheets, and for meeting with the client to explain the settlement sheet. Mr. Smith would not check the accuracy of the lists of disbursements with the client's file, other than to check the gross amount and his own fee. Mr. Smith also delegated to Ms. Staley-Jackson the responsibility to inform clients that settlement funds had been received.
After Ms. Staley-Jackson informed Mr. Smith that she was suffering from a serious illness, he permitted her to work from home, to take client files to her house, and to forward the office phone to her home and personal cell phone.
Operation of Personal Injury Trust Account
Mr. Smith maintained two attorney trust accounts at SunTrust Bank – one for attorney's fees and the other for receiving and disbursing funds in personal injury cases. The alleged violations concern the operation of the personal injury trust account. At all relevant times, Mr. Smith had sole check-signing authority for the personal injury trust account and used a computer software program to record deposits and disbursements and to issue checks payable from that account.
From January 2009 continuing through September 2012, Mr. Smith failed to create or maintain any meaningful records relating to the personal injury trust account. He did not keep accurate chronological listings of all deposits and disbursements, and failed to generate individual client matter records. Mr. Smith did not reconcile his trust account records on a monthly basis.
Mr. Smith ordinarily received monthly bank statements by mail. He testified that, sometime during 2010, the bank statements began to arrive by mail either sporadically or not at all. He said that he would go to the local branch to obtain a bank statement each month, but did not request copies of the negotiated checks. When Mr. Smith did receive a statement in the mail, it included photocopies of checks drawn on his trust account, but he did not regularly review these checks.
Ms. Staley-Jackson's Fraud
Beginning in at least 2009, Ms. Staley-Jackson regularly and systematically misappropriated funds from the firm's personal injury trust account by diverting checks drawn on that account payable to others or by fraudulently creating and cashing checks made payable to herself. During the first seven months of 2009, Ms. Staley-Jackson took checks made payable to Jason Carle, a chiropractor who had rendered services to Mr. Smith's clients. Ms. Staley-Jackson would forge Mr. Carle's endorsement, sign the check herself, and cash the check. She cashed approximately 15 checks payable to Mr. Carle for more than $34, 000 from January to July 2009. After July 2009, Ms. Staley-Jackson was apparently able to create and cash checks drawn on the trust account that listed herself as the payee. The parties stipulated that, during the period from January 2009 through September 2012, Ms. Staley-Jackson misappropriated the proceeds of checks exceeding $600, 000 in value.
Deposit of Personal Funds into Attorney Trust Account
Ms. Staley-Jackson's diversion of funds from the personal injury trust account resulted in insufficient funds in that account to cover the purposes for which the funds had been deposited. When Mr. Smith realized in 2010 that the personal injury trust account was short of funds, he attempted to compensate for the shortfall with personal funds.
Mr. Smith deposited his own personal funds or placed borrowed funds into the trust account on five separate occasions from December 2010 through June 2012. On December 1, 2010, Mr. Smith cashed out his personal retirement account and deposited that money ($35, 900) into the personal injury trust account. On February 10, 2011, Mr. Smith obtained a $10, 000 loan from his father and deposited it into the trust account. On April 18, 2011, Mr. Smith deposited into the trust account another loan from his father in the amount of $50, 000. On March 5, 2012, Mr. Smith deposited into the trust account another $25, 000 – this time a loan from his father-in-law. On June 21, 2012, Mr. Smith deposited $100, 000 into the trust account, also obtained from his father-in-law.
The hearing judge found that these deposits belied any assertion that Mr. Smith was unaware of the serious deficiencies in the personal injury trust account – that it lacked sufficient funds to cover his existing fiduciary obligations to clients and third parties. In other words, Mr. Smith was aware for more than a year and a half that his personal injury trust account at SunTrust Bank was out of trust. However, as the hearing judge found, his "persistent failure over a period of almost four years to comply with the trust account record-keeping requirements" of the Maryland Rules meant that he was unable to detect the source of the shortfall and enabled Ms. Staley-Jackson "to get away with her theft scheme for as long as she did."
Eventually the influx of personal funds failed to compensate for the misappropriations. In September 2012, SunTrust Bank reported to Bar Counsel an overdraft of Mr. Smith's trust account.
Late Payments to Medical Providers
In many of Mr. Smith's personal injury cases, the client and Mr. Smith signed an undertaking requested by a medical provider who had treated the client in which they agreed that Mr. Smith would pay fees owed to the provider directly from any settlement proceeds that he received on behalf of the client. During the time that Ms. Staley-Jackson was misappropriating funds from the trust account, these payments were made late, or sometimes not at all.
For example, in July 2010, Mr. Smith deposited a personal injury settlement check in the amount of $4, 000 for the benefit of his client Teonka Young. On August 5, 2010, Ms. Young signed a settlement disbursement sheet that listed a disbursement of $625 to New Carrollton Therapy, a medical provider that had treated Ms. Young. Ms. Young received her portion of the settlement. However, a check payable to New Carrollton Therapy for the benefit of Ms. Young was not issued until April 17, 2012.
On March 31, 2011, Mr. Smith deposited a settlement check for the benefit of his client Robert Mayo in the amount of $7, 300. On May 26, 2011, Robert Mayo signed a settlement disbursement sheet that listed disbursements of $1, 216.50 to Chris Brannigan, an attorney, and $2, 500 to Alpha Health Center-Oxon Hill. A check for Mr. Mayo's portion of the settlement was issued on May 25, 2011. However, the checks payable to Mr. Brannigan and Alpha Health Center-Oxon Hill were not issued until 10 months later, on March 9, 2012.
On March 31, 2011, Mr. Smith deposited a personal injury settlement check in the amount of $15, 500 for the benefit of client Robin Mayo. In September 2011, Mr. Smith provided Robin Mayo with a settlement disbursement sheet that listed a disbursement of $5, 305 to Alpha Health Center. Ms. Mayo received her portion of the settlement on September 23, 2011. A check payable to Alpha Health Center for the benefit of Robin Mayo was not issued until April 3, 2012.
Mr. Smith testified that he would not have sent out these payments in March and April 2012 without first checking his computer program's accounts to ensure he had not already paid these medical providers. However, Mr. Smith did not check the client files, which were then located in Ms. Staley-Jackson's house, or examine his bank statements. Instead, he talked with Mr. Staley-Jackson regarding the discrepancy and relied on her information.
Beginning in the late summer of 2011, James Bolger, a collection agent for several chiropractor facilities, began to call Mr. Smith to alert him about unpaid bills owed to those facilities by Mr. Smith's clients. When Mr. Smith was unresponsive, Mr. Bolger filed several complaints with the Commission regarding his inability to obtain payment from Mr. Smith on the unpaid medical bills. After Mr. Bolger filed complaints with the Commission, Mr. Smith issued ten checks in March and April 2012 to various medical providers represented by Mr. Bolger. Mr. Smith was aware that his trust account did not contain the necessary funds to pay the amounts due and obtained the $25, 000 loan from his father-in-law in March 2012 to help cover the deficit.
Discovery of the Fraud
Following notice in September 2012 from SunTrust Bank that he had an overdraft on his trust account, Mr. Smith discovered that the bounced checks had been payable to Ms. Staley-Jackson. Mr. Smith then retrieved his client files from Ms. Staley-Jackson's home on October 4, 2012, and shortly thereafter fired Ms. Staley-Jackson.
Unauthorized settlements and diversion of proceeds
Several complaints received by the Commission concerning Mr. Smith revealed a pattern of delegation to Ms. Staley-Jackson, settlement of claims by her without the client's knowledge, and the diversion of the settlement proceeds.
Orin H. Thomas, Jr.
Mr. Smith represented Orin H. Thomas, Jr. on a contingent fee basis with regard to a personal injury claim arising out of a motor vehicle accident that occurred on September 1, 2006. On August 27, 2009, Mr. Smith filed a complaint on behalf of Mr. Thomas in the Circuit Court for Prince George's County. The complaint named two defendants, Joy Felicia Lee, who was insured by Allstate, and Mr. Thomas's own insurance carrier, Metlife Auto & Home Insurance Company, later amended to name Metropolitan Group Property & Casualty Insurance Company ("Metropolitan") with respect to under-insured motorist benefits.
Following a settlement with Allstate for the policy limits, a check in the amount of $50, 000 issued by Allstate and payable to "Earl Smith, Esquire & his client, Orin Thomas" was deposited into Mr. Smith's attorney trust account on October 13, 2009. On November 12, 2009, Mr. Smith issued a check drawn on his trust account and payable to Bryan & Smith, P.C. representing a partial attorney's fee payment. Mr. Smith did not inform Mr. Thomas that this fee disbursement was made and did not provide Mr. Thomas with a written settlement disbursement statement. Mr. Smith testified that he wrote checks to medical providers and lien holders on Mr. Thomas' behalf; but these checks were somehow converted into checks payable to Ms. Staley-Jackson.
On January 28, 2010, Mr. Smith filed a stipulation of voluntary dismissal as to Ms. Lee following the settlement with Allstate. In October 2010, more than a year after depositing the settlement check from Allstate, Mr. Smith first issued a check from the settlement proceeds to Mr. Thomas for $3, 000. From October 2010 to June 2012, Mr. Thomas received six checks from Mr. Smith, totaling $13, 200. Mr. Thomas received no other disbursements from the settlement proceeds of $50, 000. Mr. Smith testified that he did not distribute the remaining proceeds from the Allstate settlement because he expected there to be additional liens. Mr. Smith did not respond to Mr. Thomas' repeated requests for an accounting and for information regarding the case.
After the settlement with Allstate, the claim against Mr. Thomas' own insurance company, Metropolitan, remained pending in the circuit court. On February 24, 2011, Metropolitan filed a motion to compel discovery based on Mr. Smith's failure to respond to discovery requests. Mr. ...