More Than Bad Luck

The Maryland Court of Appeals has disbarred an attorney who convinced his client to “invest” in an unrelated medical malpractice case and then misappropriated the funds.

The records demonstrate, and Respondent confirms, that between May 15 and June 18, 2012, the Respondent disbursed $26,200 of Ms. Gaither’s funds from his operating account to pay for a variety of personal expenses unrelated to the Hedgepeth case. Examples of his personal expenditures include: Revel Casino, Apparel Lacy Couture, Classic Beer and Wine and Netflix.com. The only transaction related to the Hedgepeth case was a check dated June 11, 2012, in the amount of $800 made payable to Dr. Donald Vogel, an expert witness. By June 18, 2012, the Respondent had disbursed the entirety of Ms. Gaither’s funds and his operating account had a negative balance of -$1,056.20.

The court sustained a finding that he violated the duty of confidentiality

We hold that respondent violated MLRPC 1.6(a). Respondent, although denying that there is any proof of his violation, fails to address Judge Schweitzer’s factual finding regarding respondent’s May 15, 2012 email to Ms. Gaither, in which respondent wrote,  “[Mr. Hedgepeth] will not accept a settlement less than $1 Million[.]” Judge Schweitzer found, based on respondent’s testimony during his statement under oath and at the hearing, that respondent failed to obtain Mr. Hedgepeth’s informed consent before disclosing to Ms. Gaither the amount that Mr. Hedgepeth was willing to accept in settlement. This finding of fact is based on “competent material evidence” despite lack of testimony from Mr. Hedgepeth, and it is not clearly erroneous.

Respondent claims that sharing information about pending cases with third-party litigation funders for client or attorney loans is commonplace and argues that this negates any wrongdoing. We agree with Judge Schweitzer in rejecting, without “speculat[ing] on what attorneys do in their day-to-day practice,” that “regularity voids culpability.” Attorneys must uphold their duty of confidentiality to their clients and secure the client’s informed consent before disclosing any confidential client information to third-party litigation funders. See, e.g., Phila. Bar Ass’n Prof’l Guidance Comm., Advisory Op. 2003- 15 (2003); Md. St. Bar Ethics Comm., Advisory Op. 2000-45 (2000) (in discussing ethical implications of loans by private entity to personal injury plaintiffs, stating that “[a]ll courses of action must have the client’s consent”). Respondent’s disclosure as to the amount Mr. Hedgepeth was willing to settle for was a confidential matter.

Further

We hold that respondent violated MLRPC 8.4/MARPC 19-308.4(a), (c), and (d). Judge Schweitzer found extensive deception and deceit by respondent in his dealings with Ms. Gaither throughout their financial transactions. For example, Judge Schweitzer found that respondent used Ms. Gaither’s funds for personal use and then lied repeatedly to Ms. Gaither about it, stating that he would apply her previously spent funds to upcoming cases. We overrule respondent’s exception of simply denying Judge Schweitzer’s findings, as they are not clearly erroneous.

Respondent argues that his conduct was the result of “[b]ad luck and unfortunate case results . . . between two private citizens.” We overrule this exception to Judge Schweitzer’s conclusion of law. First, this is not a case of “two private citizens” because, as noted above, there was an ongoing attorney-client relationship between respondent and Ms. Gaither. Second, respondent violated MLRPC 8.4/MARPC 19-308.4 regardless of Ms. Gaither’s status as a former or current client because the rule extends to an attorney’s dishonest personal dealings outside his practice of law. See Coppock, 432 Md. at 644, 69 A.3d at 1100. Finally, respondent’s characterization of the events and conduct in question as “[b]ad luck and unfortunate case events” goes directly against Judge Schweitzer’s findings of fact, which respondent has not shown to be clearly erroneous. Judge Schweitzer found that respondent, from the beginning, before any alleged misfortune took place, “never had any intention of using Ms. Gaither’s funds to pay for litigation costs.” She found that respondent’s “investment opportunity” was a deception created to obtain funds from Ms. Gaither under false pretenses and to use those funds as an interest-free personal loan. These findings are based upon the evidence before Judge Schweitzer and are not clearly erroneous. Based on these factual findings, respondent violated MLRPC 8.4/MARPC 19-308.4(a), (c), and (d).

Disbarment is the presumed sanction for serious dishonesty in Maryland. (Mike Frisch)