Argument: January 31, 2019
Circuit Court for Baltimore County Case No. 03-C-17-011570
Barbera, C.J., Greene, McDonald, Hotten, Getty Wilner, Alan
M. (Senior Judge, Specially Assigned) Adkins, Sally D.
(Senior Judge, Specially Assigned), JJ.
license authorizes an attorney to invoke the coercive powers
of a court in furtherance of the interests of the
attorney's client with consequences that can be
devastating, even if fair, to the adverse party. Under the
ethical rules governing attorneys, that authority must be
exercised competently, diligently, and honestly, with
adequate supervision of subordinate employees who assist the
attorney, and in compliance with the attorney's fiduciary
responsibilities to the client.
account in the record before us, Respondent Stuart R. Blatt
was for many years a respected member of the bar and a leader
in the field of creditors rights and debt collection.
However, during the past decade his practice fell on hard
times and, in what must have seemed a cruel twist of fate, he
became one of those he sued and otherwise pursued for a
living - a defaulting debtor. As a result, he made
unfortunate choices that violated the ethical rules governing
attorneys - for example, using legal process to collect a
debt on behalf of a client by garnishing wages earned by the
debtor, but diverting the proceeds to pay his firm what it
had not earned. There is no indication in the record before
us that these violations were the product of a grand fraud
scheme, as opposed to an effort to find a path out of a
confluence of unhappy events, both personal and professional.
Nevertheless, in carrying out our charge to protect the
public from errant lawyers, we must disbar Mr. Blatt from the
practice of law in Maryland.
November 20, 2017, the Attorney Grievance Commission
("Commission") through Bar Counsel filed with this
Court a petition for disciplinary or remedial action against
Mr. Blatt, alleging that he had violated numerous provisions
of the Maryland Lawyers' Rules of Professional Conduct
("MLRPC") in effect at the time of the alleged
misconduct. In particular, Bar Counsel alleged that he
had violated Rule 1.1 (competence); Rule 1.3 (diligence);
Rule 1.4 (communication); Rule 1.15(a), (c) & (d)
(safekeeping property); Rule 1.16(d) (declining or
terminating representation); Rule 5.1(a) & (b)
(responsibilities of partners, managers, and supervisory
lawyers); Rule 5.3(a), (b) & (c) (responsibilities
regarding non-lawyer assistants); Rule 8.1(a) (bar admission
and disciplinary matters); and Rule 8.4(a), (c) & (d)
to Maryland Rule 19-722(a), this Court designated Judge Vicki
Ballou-Watts of the Circuit Court for Baltimore County to
hold a hearing, make findings of fact, and provide
conclusions of law as to the alleged violations by Mr. Blatt.
Judge Ballou-Watts conducted an evidentiary hearing over
several days in August 2018. Following that hearing, Bar
Counsel withdrew the charge of a violation of Rule 8.1(a). In
a written opinion, Judge Ballou-Watts found that Mr. Blatt
had committed all of the other alleged violations.
Blatt filed a number of exceptions to the hearing judge's
Findings of Fact and Conclusions of Law. Bar Counsel did not
file any exceptions and recommended that we disbar Mr. Blatt.
This Court heard oral argument from Bar Counsel and Mr. Blatt
on January 31, 2019.
exception is made to a hearing judge's finding of fact,
we accept it as established. Maryland Rule 19-741(b)(2)(A).
When a party excepts to a finding, we must determine whether
the finding is established by the requisite standard of proof
- in the case of an allegation of misconduct, clear and
convincing evidence. Maryland Rules 19-741(b)(2)(B),
19-727(c). We summarize below the hearing judge's
findings and other undisputed matters in the record. We
address Mr. Blatt's exceptions in relation to the
findings to which they pertain.
Blatt's Early Career
Blatt is a 1970 graduate of the University of Baltimore
School of Law and became a member of the Maryland bar in June
1972. Mr. Blatt has also been admitted to the District of
Columbia and New York bars. Early in his career, Mr. Blatt
served briefly as an in-house counsel to a credit card
company and later as an in-house counsel for a department
store chain. After six years at the department store chain,
Mr. Blatt worked briefly for two law firms before opening his
own firm. Following a brief stint with another firm, he
struck out on his own again in the mid-1990s.
the course of his career, Mr. Blatt focused his practice on
creditors rights and debt collection. He is a founder of the
National Creditors Bar Association and served as its
president. He was also involved in other organizations
related to creditors rights and debt collection.
the Practice into the Margolis Firm
a health scare in 2000, Mr. Blatt sought to merge his law
practice with that of another firm. He ultimately brought his
creditors rights practice to a Baltimore County firm then
known as Margolis, Pritzker and Epstein, P.A. At that time,
the firm had a general practice that included personal injury
and family law litigation, as well as the representation of
automobile dealerships, construction companies, and small
businesses, but the firm did not have a creditors rights
practice. Within a couple years, Mr. Blatt became a principal
in the firm, which was renamed Margolis, Pritzker, Epstein
& Blatt, P.A.
decade, the Margolis firm thrived. By the time of the events
pertinent to this case, the two remaining active principals
in the firm were Mr. Blatt and Jeffrey Pritzker. The
creditors rights practice, which was overseen by Mr. Blatt,
came to dominate the firm by many measures. By 2010, it
accounted for approximately 85% of the firm's revenues
(as well as most of its expenses) and employed a large
administrative staff. At its peak, the creditors rights
practice had more than 70 employees who used a
state-of-the-art computer software system and managed 26, 000
files. Mr. Blatt signed all complaints initiating collection
actions and supervised the associate attorneys who litigated
those actions. His wife, Sharon Blatt, who had been a
clerical employee in the creditors rights practice, became
its office manager. The firm also opened a Virginia office
devoted to its creditors rights practice in 2010 or 2011.
Decline of the Margolis Firm
firm began a downward spiral when Citibank, Mr. Blatt's
largest client for many years, decided to reduce the number
of law firms to which it referred collection matters and
stopped referring business to the Margolis firm. Other
clients made similar decisions. In an attempt to shore up its
finances, the firm cut staff dramatically and moved its
banking relationship from Wells Fargo to a smaller bank -
Revere Bank. Nonetheless, the firm proved unable to pay its
bills and, during the summer of 2014, was evicted from its
offices at 110 West Road in Towson. The firm obtained new
office space in Towson.
November 2014, Mr. Pritzker left the firm and opened a solo
practice at a different location. The remnant of the firm
devoted to the creditors rights practice remained in the new
Towson office until January 2015 when the electricity was
shut off due to unpaid utility bills. The Virginia office of
the firm closed the following month.
Blatt made an effort to move his creditors rights practice to
another law firm known as the Steve Peroutka Law Group, and
moved equipment and files to that firm while still
negotiating their relationship. However, the Peroutka firm
became concerned that Mr. Blatt was not being transparent in
the transfer of clients and matters. Eventually, the arrangement
fell through and two longtime employees of Mr. Blatt's
debt collection practice helped him move his files from the
Peroutka firm to his home in early May 2015.
Blatt's mismanagement of, and misappropriation from,
certain accounts at the Margolis firm during its decline is
at the core of many of the charges against him.
Bank, as a condition of providing a loan to the Margolis
firm, had required that the firm move its accounts to the
bank. As a result, the debt collection practice maintained
its accounts at Revere Bank. The firm's loan from Revere
Bank was repaid by means of debits charged to the firm's
operating account. Mr. Blatt had signature authority with
respect to the firm's bank accounts, as did Mr. Pritzker
and Sharon Blatt.
MacDonald was the financial manager at the Margolis firm for
the last three years of its existence and later moved with
Mr. Blatt to the Peroutka firm. At the Margolis firm, she was
supervised by Sharon Blatt. She was familiar with the flow of
funds collected by the firm for its clients and described
those practices at the hearing in this case.
firm maintained several accounts as repositories for
collected debts. Funds collected for larger clients were
deposited into accounts specifically designated for each of
those clients. Funds collected for smaller, less lucrative
clients were aggregated in an account called the
"General Collections Account," which Ms. MacDonald
characterized as "a catch-all account." According
to Ms. MacDonald, within a day after collected funds were
deposited into one of these accounts, she would withdraw the
portion of the amount collected that equaled the firm's
legal fee. The remainder of collected funds would be remitted
from these accounts to clients, along with a detailed
accounting, on a weekly basis for larger clients and on a
monthly basis for smaller clients. Although the General
Collections Account received and held client funds, it was
not established as an attorney trust account.
MacDonald testified that she was directed - on various
occasions by Mr. Blatt, Mr. Pritzker, or Sharon Blatt - to
"borrow" money from these accounts on behalf of the
firm when the firm needed money for payroll or its other
bills. As a result, the General Collections Account sometimes
had insufficient funds to pay the monthly remittances to all
of the firm's smaller collections clients. Ms. MacDonald
would receive instructions from Sharon Blatt, who had
consulted with Mr. Blatt and Mr. Pritzker, as to which
clients would be paid and which would not.
the Margolis firm began experiencing severe financial
distress in 2014, it opened an account entitled the
"General Collections II Account," which was labeled
an escrow account and which was not subject to being debited
by Revere Bank for repayment of the firm's loan. Although
labeled an "escrow" account, the General
Collections II Account was not established and maintained as
an attorney trust account. Rather, it functioned more as an
operating account. At times, client funds were transferred
from the General Collections Account to the General
Collections II Account.
end of May 2015, more than $50, 000 remained in the General
Collections Account. According to Ms. MacDonald, those funds
consisted entirely of client funds, as legal fees related to
those collections had already been removed from the account.
2015, Sharon Blatt made an electronic transfer of $24, 500
from the General Collections Account to the General
Collections II Account. At approximately the same time, Mr.
Blatt issued a check drawn on General Collections II Account
to "Stuart Blatt and/or Blatt Law." The money was
deposited into an account at PNC Bank in the name of
"Blatt Law Group, LLC." The PNC account was not
designated an attorney trust account. According to Mr. Blatt,
he moved the funds from Revere Bank to the PNC account to
avoid the possibility that Revere Bank would claim those
funds to offset the firm's debt to Revere Bank. Mr. Blatt
testified at the hearing that Ms. MacDonald had told him that
the $24, 500 all related to the firm's attorney's
fees. The hearing judge did not find this testimony credible,
in light of Ms. MacDonald's testimony that attorney's
fees were withdrawn from collected debt funds within a day or
so of each deposit into the General Collections
after the transfer of funds from Revere Bank to the PNC
account, the Margolis firm defaulted on its loan from Revere
Bank. In September 2015, Revere Bank closed various accounts
of the firm at the bank, including the General Collections
Account, the General Collections II Account, and the
firm's Interest on Lawyer Trust Account ("IOLTA
account"), and applied the remaining funds against the
firm's liability for its loan from the
bank. Mr. Blatt has taken no action to recover
any client funds that may have been in those accounts.
of Client Matters
and evidence introduced at the hearing concerned four
specific incidents in which the firm's clients were
harmed by Mr. Blatt's misconduct. Two of those incidents
involved complaints that Mr. Blatt, or attorneys supervised
by him, had garnished the wages of a debtor on behalf of a
client without remitting the proceeds to the client. In one
of those incidents, the judgment against the debtor was
allowed to expire without being renewed, thereby exposing the
client to liability to the debtor for a wrongful garnishment.
In another incident, Mr. Blatt and attorneys under his
supervision failed to file lawsuits on behalf of a client
before the pertinent statute of limitations expired and
failed to return funds advanced by the client for filing fees
related to those cases. A fourth complaint related to Mr.
Blatt's failure to remit amounts collected from a debtor
on behalf of a client to that client.
Complaint of Harvard Drug Group
its acquisition in 2015 by another company, Harvard Drug
Group, LLC, was a Michigan company that distributed
prescription and over-the-counter medications to pharmacies,
physicians, and other healthcare entities. In 2000, Harvard
Drug Group retained Mr. Blatt in a collection matter
involving one of its Maryland customers, Alvin Perkins. On
behalf of Harvard Drug Group, Mr. Blatt filed suit against
Mr. Perkins, individually and trading as Neighborhood
Pharmacies, in the Circuit Court for Prince George's
County. On December 8, 2000, he obtained a judgment in favor
of Harvard Drug Group that included $108, 521.20 for the
principal, $15, 092.65 for prejudgment interest, and $16,
278.18 for attorney's fees, plus costs and post-judgment
Blatt began garnishing wages of Mr. Perkins, who then worked
for CVS Pharmacy, Inc. Mr. Blatt's firm regularly
forwarded the garnished funds to Harvard Drug Group every two
or three months, accompanied by an accounting that explained
the disbursement. By 2012, the payments forwarded by Mr.
Blatt's firm became more sporadic. On October 15, 2014,
Harvard Drug Group received three checks totaling $9, 171.34
in one envelope from Mr. Blatt. The three checks were drawn
on the General Collections Account under Mr. Blatt's
signature and related to funds garnished from Mr.
Perkins' wages during the period between December 2013
and July 2014.
receipt of those checks, Harvard Drug Group received no
additional payments from Mr. Blatt with respect to the
Perkins matter. However, Mr. Blatt's firm continued to
garnish Mr. Perkins' wages and deposited a total of $7,
100.83 into the General Collections Account.
meantime, the judgment against Mr. Perkins had expired as Mr.
Blatt had taken no action to renew the judgment. In July
2015, Mr. Perkins filed a motion to end the garnishment
because the judgment had expired. Mr. Blatt was mailed a copy
of the motion at his firm's former address, although it
is unclear whether Mr. Blatt received that copy as he had not
updated the court as to his address. In any event, Mr. Blatt
did nothing to oppose the motion, to renew the judgment, or
to inform Harvard Drug Group.
October 16, 2015, the Circuit Court for Prince George's
County granted Mr. Perkins' motion. As part of that
ruling, the court ordered Harvard Drug Group to return all
amounts garnished from Mr. Perkins' wages since October
2014. When no payment was forthcoming, Mr. Perkins sought a
judgment against Harvard Drug Group for $14, 000 plus costs
and attorney's fees. This motion was sent to Mr. Blatt
and to Harvard Drug Group's general counsel in Michigan.
When Harvard Drug Group sought to contact Mr. Blatt, they
could not find him.
Drug Group never received any of the funds garnished by Mr.
Blatt from Mr. Perkins' wages after October 2014. The
company ultimately settled with Mr. Perkins concerning the
funds garnished from him after expiration of the judgment by
paying him $15, 000 plus $5, 000 for attorney's fees. Mr.
Blatt did not make any restitution to Harvard Drug Group with
respect to those payments.
Blatt never informed Harvard Drug Group that the Perkins
judgment had expired without being renewed and that his firm
had continued to garnish Mr. Perkins' wages on its behalf
after October 2014. Nor did he inform Harvard Drug Group that
the Margolis firm had closed, that he was planning to join
the Peroutka firm, or that his relationship with the Peroutka
firm was later terminated. He failed to provide Harvard Drug
Group with a client file or a full accounting of his
firm's work on the Perkins case.
Complaint of Doris Mayer
August 25, 2011, Doris Mayer obtained a judgment of $16,
100.45 against Carter Tuck in a Virginia state court. The
attorney who represented her in that case garnished Mr.
Tuck's wages and collected part of the judgment on her
behalf but passed away before the matter was completed. After
the attorney died, his secretary forwarded Ms. Mayer's
file to an attorney in the Virginia office of Mr. Blatt's
August 2014, the firm began attempting to collect the
remaining debt from Mr. Tuck. From November 2014 to February
2015, the firm received seven checks totaling $1, 102.36 that
represented funds garnished from Mr. Tuck's wages. The
checks were deposited in the General Collections Account, but
Ms. Mayer was not informed that the checks had been received
and none of the funds were sent to Ms. Mayer. Ms. Mayer made
at least 20 calls to the firm inquiring about her case, but
never was able to speak to an attorney at the firm. She
requested her file on numerous occasions.
Mayer subsequently retained another attorney, Charles
Krumbein, to obtain information about her case. On April 20,
2015, while Mr. Blatt's collections practice was working
out of the office of the Peroutka firm, a check drawn on the
General Collections Account was sent to Ms. Mayer in the
amount of $826.76. Mr. Blatt's stamped signature was on
the check. No explanation was provided to her with the check.
4, 2015, Mr. Krumbein wrote Mr. Blatt to inform him that Mr.
Krumbein now represented Ms. Mayer, to request her file, and
to demand an accounting. No file or accounting was ever
provided, and throughout the process neither Mr. Blatt nor
any other attorney from his collections practice ever spoke
to Ms. Mayer about her case or informed her that the firm was
Complaint of Montgomery County Employees Federal Credit Union
Montgomery County Employees Federal Credit Union ("the
credit union") provides banking and financial services
to its members - county employees and their families. In
2007, the credit union entered into an agreement with Mr.
Blatt's firm to represent it in collection matters. When
the credit union would refer a new matter to the firm, the
firm would send an acknowledgment signed by Mr. Blatt. Checks
to the credit union representing amounts collected were
likewise signed by Mr. Blatt. Through 2014, the firm made
regular disbursements to the credit union, each with an
accompanying report detailing the debts collected.
January 28, 2015, the firm sent the credit union a check
under Mr. Blatt's signature drawn on the General
Collections Account in the amount of $2, 933.06. Accompanying
that check was a "Combination Disbursement and
Collection Report" for the period August 6, 2014 through
January 16, 2015, which indicated that the firm ...