MARYLAND STATE BAR ASSOCIATION, INC.
COMMITTEE ON ETHICS
ETHICS DOCKET NO. 2003-11
Is an attorney permitted, or required, to report the mishandling of fees by another attorney?
Your inquiry involves another attorney in your firm and whether you must report his actions to Bar Counsel. You advise that this attorney has converted funds from clients that should have been a fee to the firm to his own use. These conversions occurred multiple times and involved a substantial amount of money. The attorney has acknowledged these actions and has reached a settlement with those from whom he may have misappropriated funds. You inquire as to whether you must disclose these activities to Bar Counsel even though the parties have reached a private settlement.
Your second inquiry involves a pattern of activity from the same attorney. The attorney in question has been placing client funds in the operating account that would normally be placed in the firm’s account. He has further manipulated the client’s accounts to reflect “discounts” to rectify any problems that might arise. In these matters, the attorney has asserted that he was billing the clients on a flat fee basis and then converting them to an hourly basis when he had completed the limited “flat fee” services. This attorney has agreed that he would be responsible for any problems that may arise in the future, although he has not acknowledged any wrongdoing. You have further noted that steps are being put in place to avoid the attorney having access to client funds. At this time, you stated that all fees tendered in these types of situations have been earned.
In the second set of circumstances, you advise that you have insisted that the attorney involved disclose his activities to Bar Counsel. He has contacted outside counsel and is formulating a report. Your second inquiry asks whether, in light of the above, you also have a duty under Rule 8.3 of the Maryland Rules of Professional Conduct to report the attorney.
Rule 8.3(a) of the Maryland Rules of Professional Conduct states as follows:
A lawyer having knowledge that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority.
It is the consensus of the Committee that under the facts as you described, you must report the offending attorney. Many of our previous opinions have stated that attorneys with knowledge of alleged misconduct must exercise their own professional judgment to determine whether the alleged conduct violated any of the Rules of Professional Conduct and raised a substantial question as to the other attorney’s fitness as a lawyer. See for example, Ethics Docket 98-16, Ethics Docket 2000-14, Ethics Docket 01-5.***
In this matter, it is clear that the actions of the attorney in question raise “substantial” questions of his honesty, trustworthiness and fitness as a lawyer. Further, you have actual knowledge of such behavior. The Comments to Rule 8.3 note that the term “substantial” refers to the seriousness of the possible offense. Clearly, converting funds from the firm and allegedly from clients, is a serious offense with respect to the honesty of an attorney. Furthermore, your insistence on his self-reporting and the changing of your office policy to ensure that this attorney does not have access to funds clearly indicates that you have concluded his conduct raises a substantial question as to his honesty and trustworthiness. Nothing under the Rules allows the self-reporting by the offending attorney to exempt you from reporting under Rule 8.3. In fact, by not reporting such blatant dishonesty, fraud, deceit and/or misrepresentation, you may be violating Rule 8.4 by assisting in perpetuating such behavior and/or covering up such actions with remedial measures.
Lastly, a recent Court of Appeals case, Attorney Grievance Commission v. Blum, No. 11, September Term, 2002, disbarred an attorney for placing clients’ funds into his personal or operating accounts before earning them. The Court noted “that misappropriation of funds by an attorney is an act infested with deceit and dishonesty and ordinarily will result in disbarment in the absence of compelling extenuating circumstances justifying a lesser sanction.” If such behavior resulted in disbarment, clearly the repeated behaviors of the attorney in question, rises to the level of raising a “substantial question”, with the ambit of Rule 8.3, and requires you to report said attorney.