February 8, 2016
Certiorari to the Court of Special Appeals (Circuit Court for
Baltimore City) Yolanda A. Turner JUDGE
BY Harvey K. Maizels (of Baltimore, MD) on brief FOR
BY Jessica B. Kaufman, Assistant Attorney General (Brian E.
Frosh, Attorney General of Maryland of Baltimore, MD) on
brief FOR RESPONDENT
C.J., Battaglia[*], Greene, Adkins, McDonald, Watts, and
Harrell, Jr., Glenn T. (Retired Specially Assigned), JJ.
Opinion by Barbera, C.J., J. Adkins, J., concurring.
attorney discipline proceeding involves a lawyer who assisted
a husband and wife in creating a revocable living trust, and
thereafter engaged in a pattern of misconduct while acting in
the fiduciary role of trustee.
August Kent (" Respondent" ) was admitted to the
Maryland Bar on June 19, 1974. At all times relevant to this
case, Respondent maintained a law office in Baltimore County.
Attorney Grievance Commission of Maryland ("
Petitioner" ) filed a Petition for Disciplinary or
Remedial Action against Respondent on April 22,
2015. Petitioner alleged that, as trustee of
The McClelland Family Revocable Living Trust (" the
McClelland Trust" ), Respondent misappropriated funds
entrusted to him in his fiduciary capacity, and violated
Maryland Lawyers' Rules of Professional Conduct ("
MLRPC" ) 1.1 (Competence), MLRPC 1.7 (Conflict of
Interest: General Rule), MLRPC 1.8 (Conflict of Interest:
Current Clients: Specific Rules), MLRPC 1.15 (Safekeeping of
Property), MLRPC 8.1 (Bar Admission and Disciplinary
Matters), MLRPC 8.4 (Misconduct), Md. Rule 16-606.1 (Attorney
Trust Account Record-Keeping), Md. Rule 16-609 (Prohibited
Transactions), and Md. Code (1989 Repl. Vol. 2010), §
10-306 of the Business Occupations and Professions Article
(" Bus. Occ. & Prof." ) (Trust Money
Court transmitted the action to the Circuit Court for
Baltimore County and designated the Honorable Colleen A.
Cavanaugh to enter findings of fact and conclusions of law.
On September 4, 2015, Judge Cavanaugh (" the hearing
judge" ) sanctioned Respondent for failure to respond to
Bar Counsel's written discovery requests. The sanctions
included, inter alia, precluding Respondent from
producing any evidence/witnesses at the disciplinary hearing,
and deeming that all allegations in the Petition for
Disciplinary or Remedial Action were admitted. On September
21, 2015, a hearing was held, and on October 22, 2015, the
hearing judge issued Findings of Fact and Conclusions of Law.
The hearing judge concluded " that there [was] clear and
convincing evidence to support each of the charged
violations" in the Petition for Disciplinary or
February 8, 2016, we heard oral argument. For the reasons
that follow, we hold that the hearing judge did not abuse her
discretion in imposing discovery sanctions, and we order that
Respondent be disbarred.
The hearing judge's discovery sanction
20, 2015, Charles J. Balint (" Mr. Balint" ),
counsel for Respondent, accepted service of process,
including a copy of the Petition for Disciplinary or Remedial
Action. Respondent thereafter obtained an extension of time
to file a response to the Petition for Disciplinary or
Remedial Action until June 17, 2015, but did not file a
response until June 18, 2015.
10, 2015, Mr. Balint and Deputy Bar Counsel (" Bar
Counsel" ) appeared for a scheduling conference, and Bar
Counsel hand delivered interrogatories and a request for
production of documents to Mr. Balint. Mr. Balint and Bar
Counsel agreed to several deadlines that were incorporated
into a scheduling order. The order established a deadline for
the completion of written discovery by August 17, 2015, and
completion of all discovery by September 4, 2015. Respondent
was not present at the scheduling conference.
September 2, 2015, Petitioner filed a Motion for Sanctions
for Failure of Discovery, and an accompanying Motion to
Shorten Time for Respondent to Respond. According to
Petitioner's Motion for Sanctions, Respondent had thirty
(30) days to respond to the interrogatories and request for
production of documents that were hand delivered on July 10,
2015, and thirty (30) days to respond to an additional
request for production of documents that was mailed to Mr.
Balint on July 24, 2015. See Md. Rules 2-421(b) and
2-422(c). Despite an understanding between Bar Counsel and
Mr. Balint that written discovery responses would be received
by August 28, 2015, no responses were received as of
September 1, 2015.
alleged that the Motion to Shorten Time to Respond was
necessary because " Respondent's failure to provide
written discovery greatly prejudice[d] the ability of
Petitioner's counsel to prepare to take Respondent's
deposition[,]" which was scheduled, by agreement of
counsel, for September 8, 2015. Petitioner also contended
that, " [g]iven the short period of time allowed to
conduct discovery prior to trial in disciplinary matters,
compliance with discovery requirements and deadlines is
hearing judge granted the Motion to Shorten Time to Respond
on September 2, 2015, and ordered a response by 11 a.m. on
September 4, 2015. When no response was received by the
September 4 deadline, the hearing judge imposed the following
sanctions: the averments in the Petition for Disciplinary or
Remedial Action were deemed admitted; Respondent's
Response to the Petition for Disciplinary or Remedial Action
was stricken; Respondent was precluded from calling any
witnesses or presenting any documents at trial; and
Respondent was prohibited from asserting any affirmative
defenses, mitigation, or extenuation.
September 8, 2015, Respondent filed a Response to
Petitioner's Motion for Sanctions and a Motion to
Reconsider. In the Motion to Reconsider, Respondent alleged
that Mr. Balint was not in his office from 12:50 p.m. on
September 2, 2015, until 9:30 a.m. on September 4, 2015.
Thus, Mr. Balint would not have been able to respond by the
shortened deadline. In the Response to Petitioner's
Motion for Sanctions, Respondent noted that he had been
outside of Maryland and had electronically forwarded
discovery material to Mr. Balint, who was unable to open the
email attachment. The hearing judge denied the Motion to
Reconsider without a hearing.
September 21, 2015, the parties appeared for a hearing on the
merits of Respondent's violations. At the outset of the
hearing, Mr. Balint informed the judge that Respondent wanted
to be heard on the discovery sanctions. Respondent explained
that he advised Mr. Balint in June that he had a vacation
scheduled on August 22 or 23, 2015. Respondent informed the
hearing judge that he received the request for production of
documents and interrogatories from Mr. Balint on Friday,
August 14, 2015, and had three trials the following week.
However, Respondent believed that he had until September 14,
2015, to complete the discovery responses because he thought
that the requests had been received on August 14, 2015, the
day Mr. Balint sent them to him. According to Respondent, he
intended to finish his discovery responses when he returned
from vacation on September 6, 2015, and was entirely unaware
of the September 4, 2015, deadline for discovery.
hearing judge again denied Respondent's Motion to
Reconsider the discovery sanctions, noting that Respondent
had failed to provide " [a] compelling reason to further
delay these proceedings that are... on a very tight timeline
pursuant to the rules." The hearing judge granted Mr.
Balint's motion to withdraw in light of Respondent's
representations concerning his counsel. The hearing proceeded
with Respondent pro se, and concluded later that
Respondent's Motion for Reconsideration
October 14, 2015, after the conclusion of the hearing,
Respondent filed a Motion for Reconsideration and for
Appropriate Relief with the assistance of new counsel.
Respondent requested that the hearing judge strike the order
" precluding Respondent from submitting evidence in
defense of Petitioner's allegations and deeming as
admitted the averments in the Petition for Disciplinary or
Remedial Action[.]" Respondent again alleged that "
Mr. Balint failed to provide him with Bar Counsel's
written discovery requests in a timely manner and to
otherwise represent him in a competent manner."
Respondent alleged that reconsideration was appropriate where
he participated in the September 8, 2015 deposition, "
provided Answers to Interrogatories and produced many of the
requested records" after the hearing judge's
imposition of sanctions, and was currently " in the
process of having reconciliations performed for his IOLTA and
Trust bank accounts by an accounting/bookkeeping
professional" so that he could fully comply with
Petitioner's request for documents.
October 22, 2015, the hearing judge filed a Memorandum
Opinion denying Respondent's Motion for
Reconsideration. The hearing judge reasoned:
Respondent's discovery violations are severe, substantial
and ongoing. To date, Respondent has yet to fully respond to
the discovery served upon him on July 10 and July 17,
2015. Respondent proffers that he is "
in the process of having reconciliations performed for his
IOLTA and Trust bank accounts by an accounting/bookkeeping
professional. Respondent anticipates that these reports will
be completed, and made available to Bar Counsel within the
next twenty (20) days." See Respondent's Motion
at pp. 3-4. However, Respondent has had formal notice of
these proceedings for nearly five months -- since May 20,
2015 -- and actual notice of Bar Counsel's inquiry for
many months more. Any reconciliation of Respondent's
professional banking accounts in preparation for these
proceedings should been initiated, at a minimum, before the
scheduled hearing date in this matter.
Respondent initially claimed that his discovery failures were
due to his counsel's failure to send him the discovery
requests in a timely fashion; however, three months after
those requests were served, discovery is still not complete.
This court found Respondent's explanation for his
discovery violations incredible at trial and the scant proof
offered by Respondent to bolster his claim supports the
court's conclusions. See  Defendant's
Exhibit 1. This court and Petitioner have both been
severely prejudiced by Respondent's discovery failures
which continue to the date of this opinion and are
anticipated to continue, by Respondent's own estimate,
through the filing date for this court's findings of fact
and conclusions of law. Therefore, the prejudice suffered by
Petitioner, this court and Maryland's Court of Appeals
due to Respondent's continued delay will not be cured by
a simple continuance or postponement of this matter.
The hearing judge's findings of fact
October 22, 2015, the hearing judge filed Findings of Fact
and Conclusions of Law. The findings of fact were as follows:
On January 27, 2005, John and Sally McClelland (husband and
wife) signed a Trust Agreement drafted by Respondent as their
attorney. This agreement established " The McClelland
Family Revocable Living Trust" (hereinafter " the
McClelland Trust" ) with John and Sally McClelland
designated as Trustees. John McClelland passed away on
September 20, 2008. On October 11, 2010, Sally McClelland
signed a Trustee Renunciation by which she relinquished her
positon as the surviving Trustee of the McClelland Trust to
Respondent, who was named in the original Trust Agreement to
be appointed as Successor Trustee in the event John and Sally
McClelland could no longer serve as trustee(s) " due to
physical or mental incapacity, or death."
On March 1, 2011, Respondent opened a checking account in the
name of the McClelland Trust (account number ending in 8938)
at First Mariner Bank. The McClelland Trust also held
additional assets, including funds invested in a brokerage
account. From the time he took over as Successor Trustee in
October 2010, Respondent was responsible for McClelland Trust
financial accounts and for managing any funds entrusted to
him in the fiduciary role of trustee.
From the time he took over as trustee, Respondent regularly
deposited funds he received on behalf of the McClelland Trust
into his attorney escrow account, which was also maintained
at First Mariner Bank (account number ending in 1962),
instead of depositing such funds into the McClelland Trust
checking account. Respondent's escrow account at First
Mariner was an account maintained pursuant to Title 16,
Chapter 600 of the Maryland Rules. From October 2010 through
September 2013, Respondent incrementally deposited
$281,651.95 of McClelland Trust funds into his attorney
On December 17, 2010, Respondent made a loan in the amount of
$40,000 to Mangia Bene, LLC, a business entity owned by Greg
Orendorff, one of Respondent's clients, by issuing a
check drawn on Respondent's attorney escrow account.
Respondent designated this transaction as a loan of
McClelland Trust funds from his escrow account. Respondent
did not engage independent legal counsel to represent the
McClelland Trust regarding the $40,000.00 loan he made as
trustee to a legal clients' business entity, nor did he
advise the loan recipient in writing of the desirability of
seeking independent legal advice before entering into a
financial transaction with Respondent in his capacity as
trustee of the McClelland Trust.
By November 2011, Respondent no longer maintained the accrued
balance of McClelland Trust funds in his attorney escrow
account. Bar Counsel's investigator, Mr. Fiedler,
testified concerning his analysis of escrow account bank
records obtained by subpoena from First Mariner Bank and the
Quicken Register report Respondent provided in the course of
Bar Counsel's investigation. From those records, Mr.
Fiedler was able to compile a " Negative Balance
Chart" (Tab 24 of Petitioner's Exhibit 1)
demonstrating that on November 25, 2011, the overall balance
in Respondent's escrow account was only $88,572.21 at a
time when Respondent should have been holding $95,443.73 in
the account solely for the McClelland Trust client matter.
The McClelland Trust negative balance subsequently increased.
By March 2012, Respondent's overall escrow account
balance was drawn down to an amount under $17,000.00. No
significant disbursements of McClelland Trust funds occurred
during this period. As just one snapshot of the deficiency in
McClelland Trust funds, on March 21, 2012, the overall
balance in Respondent's escrow account was at $16,300.90.
At that time, he should have still had $91,693.73 in the
account solely for the McClelland Trust matter. Respondent
therefore has an escrow account deficiency of $75,392.83 with
regard to the individual client matter of the McClelland
Mr. Fiedler pointed out in his testimony that Respondent
personally benefited from the misappropriation of McClelland
Trust funds. From November 17-25, 2011, Respondent issued
four checks totaling $13,734.00 payable to himself, including
two checks (numbered 3108 and 3113) with no memo notation
identifying any client matter. This issuance of such checks
contributed to the initial negative balance on McClelland
Trust funds on November 25, 2011. Thereafter, throughout 2012
and 2013, Respondent continued to draw checks payable to
himself, including many that included no memo notation.
* * *
This court finds by clear and convincing evidence that
Respondent knowingly and intentionally misappropriated funds
entrusted to him as trustee of the McClelland Trust and that
he derived personal benefit from the use of the
As averred in paragraph 10 of the original and amended
petitions, Respondent also drew numerous checks to cash on
his attorney escrow account[.]... Petitioner does not contest
that the cash obtained from these checks was deposited into
Sally McClelland's personal checking account at Wachovia
(later Wells Fargo) Bank during her lifetime, but the drawing
of checks payable to cash nevertheless constituted a
prohibited transaction under Maryland Rule 16-609(b).
Sally McClelland passed away on March 24, 2013. At the time
of her death, the McClelland Trust checking account at First
Mariner Bank had a balance of only $303.40. On April 24,
2013, Respondent deposited $41,664.87 to the McClelland Trust
checking account, constituting the aggregate sum from three
separate bank accounts maintained by Sally McClelland at the
time of her death.
On April 24, 2013, Respondent issued check number 1204 drawn
on the McClelland Trust checking account in the amount of
$11,602.00 payable to Duda-Ruck Funeral Home of Dundalk in
payment of Sally McClelland's funeral expenses. On the
same date, he issued a check number 1203 drawn on the
McClelland trust checking account in the amount of $3,000.00
payable to " Herkimer Street LLC," a forfeited
business entity of which Respondent and his wife Marjorie
were the sole members. Respondent knowingly issued this check
as an unauthorized disbursement of McClelland Trust funds for
his personal benefit.
On May 11, 2013, Respondent issued a check number 1205 drawn
on the McClelland Trust checking account in the amount of
$10,000 payable to " Kenwalls II, LLC." The memo
line on the check identified it as " Loan."
Kenwalls II, LLC is a business entity owned and organized by
Brian E. Walls, Respondent's son-in-law, to purchase,
remodel and sell homes. Respondent did not engage independent
legal counsel to review the terms of the transaction on
behalf of the McClelland Trust when making this loan to his
On May 31, 2013, Respondent authorized a $15,000.00 wire
transfer of funds from the McClelland Trust checking account
to Brian Walls. This transaction was designated as a loan
secured by a mortgage on a parcel of real property Mr. Walls
owned in Camden County, Missouri. Respondent did not engage
independent legal counsel to review the terms of the
transaction on behalf of the McClelland Trust when making
this personal loan to his son-in-law.
In August 2013, legal counsel for First Mariner Bank wrote to
Bar Counsel to report concerns about the activity in the
McClelland Trust checking account, including issuance of the
checks to Herkimer Street LLC and Kenwalls II LLC and the
wire transfer to Brian Walls. In response to Bar
Counsel's initial inquiry letter, Respondent, through
counsel, falsely claimed that the $3,000.00 check to Herkimer
Street LLC " was drawn on the wrong account" in
error. Only after receiving notice of the complaint did
Respondent return $3,000.00 to the McClelland Trust checking
account by depositing a check (drawn on the Kenwalls II, LLC
checking account) on September 26, 2013.
Following commencement of Bar Counsel's investigation.
Respondent obtained repayments of the three outstanding loans
of McClelland trust funds from Mangia Bene LLC, Kenwalls, II
LLC and Brian Walls.
In the course of Bar Counsel's investigation, Respondent
provided an accounting of McClelland Trust funds that did not
accurately account for all funds entrusted to him in a
fiduciary capacity. Respondent did not create and maintain a
client matter record that complied with the requirements of
Maryland Rule 16-606.1(a)(3) for the McClelland Trust funds
in his attorney escrow account.
On April 4, 2013, Respondent deposited a check issued by
Pershing/Founders Financial Securities LLC, payable to "
The McClelland Family Rev. Trust" in the amount of
$15,000.00, into his attorney escrow account. Respondent did
not include that deposit in the accounting of McClelland
Trust funds provided to Bar Counsel's investigator in
January 2014 during the investigation of the complaint prior
to the filing of public charges (Tab 17 of Petitioner's
Exhibit 1). Respondent added the $15,000.00 deposit to a
revised 'McClelland-IOLTA Report" (Tab 25) he
produced to Petitioner when he appeared for his deposition in
this matter on September 8, 2015.
The hearing judge's conclusions of law
on the above findings of fact, the hearing judge concluded
that there was clear and convincing evidence that Respondent
had violated MLRPC 1.1, 1.7, 1.8(a), 1.15(a) and (d), 8.1(a),
8.4(a)-(d), Maryland Rules 16-606.1 and 16-609, and Bus. Occ.
& Prof. § 10-306.
1.1 provides that " [a] lawyer shall provide competent
representation to a client. Competent representation requires
the legal knowledge, skill, thoroughness and preparation
reasonably necessary for the representation." The
hearing judge concluded that " [b]y failing to act in a
manner consistent with the stated disposition objectives of
the McClelland Trust Settlors (John and Sally McClelland),...
Respondent did not provide competent representation to the
McClelland Trust." (citing Attorney Grievance
Comm'n v. Sachse, 345 Md. 578, 585-86, 693 A.2d 806,
810 (1997) (lawyer's failure to use knowledge, skill,
thoroughness and preparation reasonably necessary for
protection of trust or its beneficiaries violated Rule 1.1).
1.7 prohibits representation involving a conflict of
interest, which exists where " there is a significant
risk that the representation of one or more clients will be
materially limited by the lawyer's responsibilities to
another client, a former client or a third person or by a
personal interest of the lawyer." MLRPC 1.7(a)(2);
seeSachse, 345 Md. at 588, 693 A.2d at 811
(" Conflicts of interest impair the trustee's
ability to act on behalf of the beneficiaries with
independent and disinterested judgment in the administration
of the trust, the rationale being that it is generally not
possible for the same person to act fairly in two capacities
and on behalf of two interests in the same transaction."
) (citation omitted). The hearing judge concluded that
Respondent's loans of McClelland Trust funds to another
client's business, his son-in-law's business, and his
son-in-law individually, ...