Bar Counsel: The Martin Decision: A Lesson on Fees

From Washington Lawyer, June 2014
By Joseph Perry

On February 13, 2014, the D.C. Court of Appeals reissued its opinion and denied petitions for rehearing and rehearing en banc in the matter of In re Martin. Bar Counsel commends the opinion to all members of the Bar as required reading on the charging and collection of fees.

First, the Martin court addresses the basic premise that a fee must be reasonable. See Rule 1.5(a). The court held that “[g]enerally, an attorney should not acquire ‘a greater interest in the outcome of the litigation than his clients,’” and that the combination of Mr. Martin’s contingency fee and hourly fees gave him “well over a 50% interest in the outcome of [his client’s] litigation in violation of Rule 1.5(a).” The court further held that the fees of other lawyers working on the same matter must be taken into account (whether or not those lawyers are sharing a single fee). In Mr. Martin’s case, the court stated that even if Mr. Martin’s fee was reasonable (which it was not), “the fee unquestionably became unreasonable when taking into account the fees charged by [other] counsel.”

Even if your billing always stays well within the bounds of reasonableness, the Martin case still has much to teach. For example, suppose that after having worked diligently for a standard 33 percent contingency, you receive a settlement check for your client’s case. You e-mail your client a disbursement sheet in the morning. Having heard nothing back by the afternoon, you withdraw your share from trust.[1] Time to take that vacation you’ve been waiting for, right?

Maybe not. After Martin, District of Columbia attorneys have been advised that disbursing funds from your trust account to your operating account—even if you believe the funds are earned—does not eliminate your obligations under Rules 1.15(a) and (d).[2] Specifically, the court found that where a client, with reasonable promptness, disputes an attorney’s right to fees already withdrawn from the attorney’s trust account, the attorney must place the disputed amount in a separate account in accordance with Rule 1.15(a).

In Martin, the client disputed the attorney’s claim to fees—at the latest—the day it received the disbursement sheet. The court held that it “need not address other circumstances in which a client is less diligent in reviewing and disputing an attorney’s fee,” and stated that what exactly constitutes “reasonable promptness” will be a case-specific inquiry. For the time being, a D.C. attorney who has already paid himself, and is then confronted with a client disputing his fee, might do well to remember this observation from the Martin court: “The protections afforded by Rule 1.15 to a client’s interest in disputed funds should not be underestimated.”

It is important to remember that regardless of timing, your client’s dispute does not have to be “genuine,” “serious,” or “bona fide,” it only has to exist. This may be sobering news to an attorney who just made considerable efforts to win a case and now wants only to cut ties with a client who enjoys disputing just about everything. Indeed, attorneys in the middle of such relationships might make every effort to hurry up and get out. After Martin, however, those attorneys are best advised to confirm their client does not object before making any distributions.

Finally, assume that you do get into a fee dispute with one of your clients. You properly maintain the disputed funds in a separate trust account, and proceed to arbitration before the Attorney/Client Arbitration Board (ACAB).[3] Further suppose that you feel the outcome of these proceedings is unjust.

Being a zealous attorney, you might plan on contesting the ACAB award. Generally, there may be nothing wrong with this proposition, but members of the Bar should note that in Martin, the court ruled that given the specific facts before it, it was not inclined to approve a “fight to the death.” Specifically, the court found that Mr. Martin “repeatedly resist[ed] the mandatory arbitration process” and took “fruitless appeals” following an ACAB decision awarding fees to his client. The court found that this behavior defeated the purpose of Bar Rule XIII and unreasonably withheld the arbitral award to which Mr. Martin’s client was entitled in violation of Rule 1.16(d). Although the court made clear that it “did not lightly dismiss” Mr. Martin’s right to contest the outcome of arbitration, it appears that this particular right must be exercised within the bounds of reasonableness.[4] Separately, the court found Mr. Martin’s conditioning of a settlement agreement with his client on withdrawal of the pending bar complaint seriously interfered with the administration of justice in violation of 8.4(d).

The Martin decision provides a good course on what you can charge, how to handle a dispute over what you charge, and the manner in which you can fight when that dispute is not resolved to your liking. It is also yet another affirmation of an idea found throughout the court’s disciplinary case law: Client funds are sacrosanct.

Joseph Perry serves as assistant bar counsel.

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Notes

[1] Best practice in such a situation would be to speak with your client directly and obtain his or her signature on the disbursement sheet prior to withdrawing any funds.

[2] Formerly Rule 1.15(c). Rule 1.15(d) states:

• When in the course of representation a lawyer is in possession of property in which interests are claimed by the lawyer and another person, or by two or more persons to each of whom the lawyer may have an obligation, the property shall be kept separate by the lawyer until there is an accounting and severance of interests in the property. If a dispute arises concerning the respective interests among persons claiming an interest in such property, the undisputed portion shall be distributed and the portion in dispute shall be kept separate by the lawyer until the dispute is resolved. Any funds in dispute shall be deposited in a separate account meeting the requirements of paragraph (a) and (b).

[3] Under D.C. Bar Rule XIII, D.C. attorneys are deemed to have agreed to final and binding arbitration of fee disputes before the ACAB under certain common circumstances. D.C. Bar Rule XIII(a) states:

• An attorney subject to the disciplinary jurisdiction of this Court shall be deemed to have agreed to arbitrate disputes over fees for legal services and disbursements related thereto when such arbitration is requested by a present or former client, if such client was a resident of the District of Columbia when the services of the attorney were engaged, or if a substantial portion of the services were performed by the attorney in the District of Columbia, or if the services included representation before a District of Columbia court or a District of Columbia government agency.

[4] Beyond what may or may not constitute a violation of Rule 1.16(d) in challenging an ACAB award, attorneys who assert claims that lack a good-faith basis in law or fact may also violate Rule 3.1 (“Meritorious Claims and Contentions”).

Disciplinary Actions Taken by the Board on Professional Responsibility

Original Matters

In re Douglas P. Wachholz. Bar No. 930792. March 21, 2014. The Board on Professional Responsibility recommends that the D.C. Court of Appeals disbar Wachholz by consent.

In re Jeffrey R. Williams. Bar No. 414757. March 21, 2014. The Board on Professional Responsibility recommends that the D.C. Court of Appeals disbar Williams by consent, nunc pro tunc to December 3, 2012.

Disciplinary Actions Taken by the District of Columbia Court of Appeals

Reciprocal Matters

In re Sheron A. Barton. Bar No. 997851. March 6, 2014. In a reciprocal matter from the United States District Court for the District of Maryland, the D.C. Court of Appeals imposed identical reciprocal discipline and suspended Barton for one year, nunc pro tunc to January 8, 2014. Reinstatement is subject to the conditions imposed by the United States District Court for the District of Maryland and contingent upon fitness. Barton had been found to have submitted meritless filings, failed to appear at court hearings, failed to keep clients apprised of the status of the representations, charged excessive fees, and failed to adequately supervise a nonlawyer.

Interim Suspensions Issued by the District of Columbia Court of Appeals

In re Gilbert Baber. Bar No. 428285. March 25, 2014. Baber was suspended on an interim basis pursuant to D.C. Bar R. XI, § 9(g), pending final action on the Board on Professional Responsibility’s December 30, 2013, recommendation of a three years’ suspension with fitness and restitution as a condition of reinstatement.

In re Andre P. Barber. Bar No. 466138. March 13, 2014. Barber was suspended on an interim basis pursuant to D.C. Bar R. XI, § 9(g), pending final action on the Board on Professional Responsibility’s December 31, 2013, recommendation of disbarment.

In re Takisha Brown. Bar No. 472664. March 25, 2014. Brown was suspended on an interim basis pursuant to D.C. Bar R. XI, § 9(g), pending final action on the Board on Professional Responsibility’s December 30, 2013, recommendation of disbarment.

In re Lorenzo C. Fitzgerald Jr. Bar No. 390603. March 25, 2014. Fitzgerald was suspended on an interim basis pursuant to D.C. Bar R. XI, § 9(g), pending final action on the Board on Professional Responsibility’s December 31, 2013, recommendation of a one-year suspension with fitness.

In re Charles Malalah. Bar No. 978801. March 25, 2014. Malalah was suspended on an interim basis pursuant to D.C. Bar R. XI, § 9(g), pending final action on the Board on Professional Responsibility’s December 31, 2013, recommendation of disbarment.

In re William N. Rogers. Bar No. 73221. March 25, 2014. Rogers was suspended on an interim basis pursuant to D.C. Bar R. XI, § 9(g), pending final action on the Board on Professional Responsibility’s December 31, 2013, recommendation of a 90-day suspension with fitness.

Disciplinary Actions Taken by Other Jurisdictions

In accordance with D.C. Bar Rule XI, § 11(c), the D.C. Court of Appeals has ordered public notice of the following nonsuspensory and nonprobationary disciplinary sanctions imposed on D.C. attorneys by other jurisdictions. To obtain copies of these decisions, visit www.dcattorneydiscipline.org and search by individual names.

In re Mike Meier. Bar No. 444132. On October 15, 2013, the Virginia State Bar Disciplinary Board publicly reprimanded Meier for attempting to violate a rule relating to candor to a tribunal.

In re Jon E. Shields. Bar No. 431003. On November 5, 2013, the Virginia State Bar issued Shields a public reprimand without terms for failing to safeguard an advanced fee in trust until earned, failing to communicate with a client, and failing to protect a client’s interests upon termination of the representation.

In re Lowell J. Gordon. Bar No. 142380. On January 24, 2014, the Attorney Grievance Commission of Maryland reprimanded Gordon for failing to obtain client consent before using funds for attorney fees, failing to communicate with a client, and a lack of competence in handling a client’s matter.

Informal Admonitions Issued by the Office of Bar Counsel

In re Vivien J. Cockburn. Bar No. 459931. March 13, 2014. Bar Counsel issued Cockburn an informal admonition. While serving as prosecutor assigned to a case wherein the accused was charged with first-degree felony murder and other charges in relation to the stabbing death of a victim, Cockburn knew or should have known information that tended to negate the guilt of the accused but failed to disclose this information to the defense and engaged in conduct that seriously interferes with the administration of justice. Rules 3.8(e) and 8.4(d).

In re Rodney C. Mitchell. Bar No. 489439. March 14, 2014. Bar Counsel issued Mitchell an informal admonition. While retained to represent a client in two related civil matters, Mitchell failed to safeguard the client’s property and promptly deliver it to the client. Additionally, in connection with the termination of representation, respondent failed to take timely steps, to the extent reasonably practicable, to surrender papers and property to which the client was entitled. Rules 1.15(a), 1.15(c) and 1.16(d).

In re Michael A. Romansky. Bar No. 942169. March 13, 2014. Bar Counsel issued Romansky an informal admonition for failing to report a 2006 guilty plea in the Circuit Court of Arlington County, Virginia to the District of Columbia Court of Appeals and the Board of Professional Responsibility, as required pursuant to DCCA Rule XI, § 10.

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The Office of Bar Counsel compiled the foregoing summaries of disciplinary actions.
Informal Admonitions issued by Bar Counsel and Reports and Recommendations
issued by the Board on Professional Responsibility are posted at
www.dcattorneydiscipline.org. Most board recommendations as to discipline are
not final until considered by the court. Court opinions are printed in the Atlantic Reporter and also are available online for decisions issued since August 1998. To obtain
a copy of a recent slip opinion, visit www.dccourts.gov/internet/opinionlocator.jsf.