The Most Egregious

A client complaint against an attorney was withdrawn but the investigation uncovered trust account violations and resulted in a disbarment order by the Montana Supreme Court.

The Billings Gazette reported on criminal charges.

Respondent

Doud has been licensed to practice law in Montana since 2006. She joined a law firm after graduation from law school. She left the firm approximately a year later, forming a partnership with her husband, who is also an attorney licensed to practice law in Montana. Doud’s father, Timothy McKeon, who had been licensed to practice law in Montana since 1987, later joined the firm. In 2015, Doud’s husband left the firm.

Misconduct

Doud was the sole authorized signatory on the firm’s trust accounts and bore responsibility for monitoring trust account activity and abiding by trust account auditing requirements. She failed to maintain those accounts consistent with applicable rules and safeguards for the period from at least January 1, 2016, through March 31, 2020, during which time the firm transferred funds on an almost daily basis from its trust accounts to its operating account, other firm accounts, and Doud’s and McKeon’s personal accounts. The transferred amounts were almost always in even amounts that were not consistent with earned contingency fees or cost reimbursements related to a particular client’s case.

Doud did not keep a ledger for the firm’s trust accounts or separate cost ledgers for firm clients. She never reconciled the firm’s trust accounts, checking accounts, or client settlement statements with the firm’s bank statements. Her failure to properly maintain the accounts meant that record-keeping errors went undetected and the misappropriation and commingling of client funds was concealed. The firm’s trust accountings were “abysmally deficient” and distributions Doud routinely made from the firm’s trust accounts violated trust requirements and the Montana Rules of Professional Conduct.

The reconciliation by the Office of Disciplinary Counsel led to this finding

As of March 31, 2020, based on its own records, the firm owed clients $238,016.66 and third parties $384,738.18, or a total of $622,754.84. However, these amounts include charges for staff employee time based on an hourly rate ranging from $120 to $175 per hour. If such employee costs are deducted, the amount owed to clients on that date was $531,449.86 and to third parties $834,683[.]33, or a total of $1,366,133.19. Yet the [trust] account balance on that date was only $44,331.01. The ODC’s reconciliation exhibits clearly establish the firm’s [trust] account was routinely below the client funds that should have been on deposit.

And

The firm’s practice of billing clients for staff time under the guise of “medical consulting services” and “paralegal consultant services” had “disastrous financial consequences” for those clients. Hennelly, who received only $14,000 of a $1.2 million settlement, was billed $387,935,80 for firm staff time. As of March 31, 2020, the firm improperly billed 15 clients a total of $743,378.35 for services provided by the firm’s employees.

Doud also knew of, and benefitted from, McKeon’s practice of charging clients an additional contingency fee for negotiating liens and/or medical-related debt in disregard of the contingency fee agreement and applicable ethical obligations. In some instances, McKeon charged this additional contingency fee before undertaking such negotiation, expressing an intent to negotiate the debt later, and on the theory that the firm was entitled to take the fee up front because the firm would “eventually” earn it.

She alleged that her counsel in the bar matter had a conflict in representing both her and her father, who took a disability suspension

We agree with ODC that Doud received the process due her in this disciplinary proceeding. We fail to appreciate how the alleged conflict precluded her from taking actions she alleges she may have otherwise taken in this matter. Although Doud indicates dissatisfaction with some admissions made in her response to the amended complaint, she provides no explanation for how an alleged conflict dictated those admissions. The fact that McKeon transferred his Bar status to inactive/disability in no way affected Doud’s ability to do, or not do, the same. Doud does not explain how a conflict prevented her from offering mental state defenses or arguing she was relying on advice of counsel. She does not explain how the alleged conflict affected the depositions the Commission entered into evidence. Finally, her insistence that she and McKeon would have been witnesses against each other at their respective disciplinary hearings but for the conflict is belied by the fact that both were called to testify at Doud’s disciplinary hearing, and both invoked their Fifth Amendment right against self-incrimination. Ultimately, Doud neither persuades us that a nonwaivable conflict existed nor that any alleged conflict affected her due process rights in any meaningful way.

Recommended sanction

In recommending disbarment, the Commission asserted that the scope and magnitude of Doud’s ethical failures were “unequaled in the Commission’s collective experience,” and this case proved the most egregious and extensive trust violation and misappropriation/commingling case to ever come before it.

The court rejected attacks on the findings of fact. (Mike Frisch)