Filed April 9, 2007
In re Gerard A. Serritella, Jr.
Commission No. 03 SH 115
Synopsis of Review Board Report and Recommendation
The Administrator filed a four-count complaint against Respondent, Gerard A. Serritella, Jr., alleging that he obtained unreasonable fees in two matters, failed to return unearned fees in three matters, made misrepresentations to one client, and made false statements to the Administrator during the investigation of this matter. Serritella admitted some of the factual allegations, denied others, and denied all allegations of misconduct.
The Hearing Board granted Serritella's motion for summary judgment on Count III of the Complaint. It subsequently found that in two matters Serritella obtained an unreasonable fee, failed to promptly refund any part of a fee paid in advance that has not been earned, engaged in conduct that is prejudicial to the administration of justice, and engaged in conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute. The Hearing Board recommended that Serritella be censured and ordered to pay restitution.
In a previous Report and Recommendation (In re Serritella, No. 03 SH 115 (Hearing Board, November 24, 2004)), the Review Board agreed with the Administrator's contention that the Hearing Board erroneously granted summary judgment in Serritella's favor on Count III, and remanded the matter for a hearing on that Count.
Following the hearing on remand, the Hearing Board found that the Administrator did not prove the allegations of misconduct in Count III.
Here, the Review Board addressed Serritella's contentions that the findings that he obtained unreasonable fees are contrary to the manifest weight of the evidence and that the Hearing Board should have granted his motion for summary judgment on the issue of whether he earned his fees.
The Review Board also addressed the Administrator's contentions that the Hearing Board erred when it (1) found insufficient proof of dishonest conduct; (2) found insufficient proof of knowingly making false statements to the Administrator during the investigation of this matter; (3) found insufficient proof of the charges alleged in Count III; (4) recommended censure rather than suspension; and (5) found that Serritella is entitled to keep a portion of the fees he collected as a retainer.
After considering the evidence presented at the initial hearing and on remand, the Review Board affirmed the Hearing Board's factual findings and findings of misconduct. It recommended that Serritella's license be suspended for thirty days and until he makes restitution.
BEFORE THE REVIEW BOARD
ILLINOIS ATTORNEY REGISTRATION
|In the Matter of:
GERARD A. SERRITELLA, JR.,
Commission No. 03 SH 115
REPORT AND RECOMMENDATION OF THE REVIEW BOARD
The Administrator-Appellee filed a four-count complaint against Respondent-Appellant, Gerard A. Serritella, Jr., alleging that he obtained unreasonable fees in two matters, failed to return unearned fees in three matters, made misrepresentations to one client, and made false statements to the Administrator during the investigation of this matter. Respondent admitted some of the factual allegations, denied others, and denied all allegations of misconduct.
Prior to the initial hearing in this matter, the Hearing Board granted Respondent's motion for summary judgment on Count III of the Complaint, which alleged that he obtained an unreasonable fee, failed to return unearned fees, and engaged in dishonest conduct.
After the initial hearing, the Hearing Board found, with respect to Counts I and IV, that Respondent obtained an unreasonable fee in violation of Rule 1.5(a) of the Rules of Professional Conduct; failed to promptly refund any part of a fee paid in advance that has not been earned, in violation of Rule 1.16(e); engaged in conduct that is prejudicial to the administration of justice, in violation of Rule 8.4(a)(5); and engaged in conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute, in violation of Supreme Court Rule 771 (renumbered as Supreme Court Rule 770). The Hearing Board further found that the Administrator did not meet her burden of proof on the remaining
charges. The Hearing Board recommended that Respondent be censured and that he be ordered to pay restitution. In re Serritella, No. 03 SH 115 (Hearing Board, November 24, 2004) (Serritella I).
Respondent filed a notice of exceptions challenging the Hearing Board's findings and contending that the Hearing Board erred in denying his motion for summary judgment as to Counts I and IV.
The Administrator asserted that the Hearing Board erred by (1) granting summary judgment in Respondent's favor on Count III of the Complaint; (2) finding insufficient proof of dishonest conduct; (3) finding insufficient proof of knowingly making false statements to the Administrator during the investigation of this matter; (4) recommending censure rather than suspension; and (5) finding that Respondent is entitled to keep a portion of the fees he collected as a retainer.
This Board agreed with the Administrator that the Hearing Board erroneously granted summary judgment on Count III of the complaint, and remanded the matter for a hearing on Count III only. In re Serritella, No. 03 SH 115 (Review Board, August 18, 2005). The Hearing Board subsequently found that the Administrator did not prove the allegations of Count III, and again recommended that Respondent receive a censure for the misconduct that was proven in the first hearing. In re Serritella, No. 03 SH 115 (Hearing Board, June 20, 2006) (Serritella II).
The Administrator has challenged the Hearing Board's findings with respect to the remanded Count III. She contends that the findings are contrary to the manifest weight of the evidence and also asserts that Respondent's misconduct warrants a suspension.
We now address the issues raised prior to remand that were not resolved by our previous Report and Recommendation as well as those issues raised by the Administrator following remand.
The following evidence that is relevant to the issues before us was adduced at the hearings in this matter.
Rhonda Reents met with Respondent on December 16, 2002, and told him about two incidents in which she had been involved. She had been arrested for criminal damage to property over $300 after she drove a friend, Cyndi Cunningham, to her former boyfriend's house, where Cunningham threw a rock through a window and also threw a beer bottle at the boyfriend. Later that day, Reents drove Cunningham back to the house to "finish the job," and Cunningham threw another rock through the window.
In between the first and second rock-throwing incidents, Reents drove Cunningham to pick up her son from school. There, Reents and Cunningham had an altercation with Cunningham's former sister-in-law, Rikki Olmstead. As Reents drove away, she drove close to Olmstead and said, "I guess I missed my million points." Reents testified that she never aimed her vehicle at Olmstead, nor did she want to injure her. Respondent told Reents that she could be charged with attempted murder for this incident. Respondent said he would charge $10,000 to represent her, and Reents paid Respondent that amount.
On December 18, 2002, the State's Attorney sent Reents a letter stating that she was eligible for the deferred prosecution program for the rock-throwing incident. Reents later entered the program. Consequently, no charges were filed against her for the rock-throwing
incident. According to Assistant State's Attorney William Ogolin, Respondent had no involvement in the State's Attorney's decision to transfer the case to deferred prosecution. Both the Assistant State's Attorney assigned to the case and the Deferred Prosecution Program Administrator testified that, at the time they referred the complaint to deferred prosecution and processed Reents' application, they did not know that Respondent represented Reents. Reents testified that Respondent tried to take credit for the deferred prosecution.
No charges were ever filed against Reents for the driving incident. Assistant State's Attorney Ogolin was not even aware of the incident until Respondent brought it to his attention. Ogolin then reviewed the police report and referred it to the State's Attorney's traffic division. The State's Attorney declined to charge Reents.
In January 2003, Reents called Respondent and requested a refund, but Respondent never refunded any money to her.
The Administrator alleged that Respondent made false statements in a letter that he submitted to the Administrator about the Reents matter. Respondent stated in his letter that Reents told him that she committed the offenses of criminal damage to property over $300, aggravated battery, and attempted murder. At the hearing in Serritella I, Respondent testified that Reents never specifically said that she was guilty of attempted murder. He further testified that the letter was written in "conclusionary form," and he did not intend to quote Reents.
In April 17, 2002, Marianne Van Pelt met with Respondent to discuss his representation of her on a charge of driving under the influence of alcohol. Van Pelt testified that Respondent said that she might be put in jail because of her level of intoxication and because
she was also charged with resisting arrest. Respondent told her that his fee for representing her through trial would be $7500. Van Pelt paid him the full amount. She testified that Respondent told her that she had three days to decide whether she wanted to go forward with the representation, and that he would not cash her check until April 22, 2002. Respondent denied making that statement.
After speaking with a friend, Van Pelt decided that she did not want Respondent to represent her. She called Respondent at home on the evening of April 17, 2002, and told him that she wanted to cancel their agreement and wanted her money back. She testified that Respondent said that his fee was non-refundable.
Respondent testified that Van Pelt did not discharge him on April 17. According to Respondent, Van Pelt called to repeat her request that he file a civil suit against the police.
Van Pelt testified that she called her credit union the following morning and learned that Respondent had cashed her check. Later that day, April 18, 2002, she delivered a letter to Respondent's office stating that she wished to terminate his services immediately and requesting that he fully refund her money. The letter indicated that she would contact the Commission and the State's Attorney if Respondent did not refund her money.
Respondent was not in the office when Van Pelt delivered her letter. Van Pelt gave the letter to a secretary, but the secretary would not sign a receipt for it. Van Pelt wrote on her copy of the letter that she delivered it on April 18.
Respondent testified that he called Van Pelt after he learned that she had been to his office. He recalled that Van Pelt said that she wanted her money back and called him a "thief" and a "crook," but she did not discharge him. Van Pelt, on the other hand, testified that
she had no doubt that she discharged Respondent after she delivered her letter and spoke with Respondent on the telephone.
Van Pelt called Respondent several times between April 18, 2002, and April 23, 2002, demanding a refund. Respondent testified that she repeatedly called him at home "screaming and yelling" that he was a crook and a thief.
On April 22, 2002, Respondent delivered a letter to Van Pelt. The letter, which was dated April 18, stated among other things that Van Pelt had "very serious criminal problems," and that his fee was reasonable. Respondent further stated that he and Van Pelt had a binding contract and he would not return the fee because he was "ready, willing, and able" to fulfill his part of the contract.
The following day, April 23, 2002, Respondent wrote Van Pelt a second letter and enclosed a check for $6000. He stated that he was keeping $1500 of the original fee "to cover the interview, my initial contact with the State's Attorney in McLean County, the numerous telephone calls that you made to my home over a 3-day period, and the tantrum that you exhibited in my office."
At the hearing, Respondent testified that the $1500 fee he kept was for the time he spent in the initial interview with Van Pelt, the time it took for him to dictate and deliver his letter dated April 18, 2002, and "the aggravation of the telephone calls." In addition, he called the State's Attorney to make an appointment to discuss Van Pelt's case and analyzed the case while he was opening the file.
Respondent further testified that he told Van Pelt that the initial consultation was free if she did not hire him. If she did hire him, then the consultation was part of the fee.
Respondent said that he did not explain that to Van Pelt because he "never got into the next step, because…it wasn't relevant."
Van Pelt filed a civil suit against Respondent seeking the $1500 in fees that Respondent retained. Following a trial, she received a judgment in her favor in the amount of $1150. Respondent moved the court to reconsider the judgment, and the court reduced the amount of the judgment to $800.
On October 4, 2001, B.R., a juvenile, and Cheryl R., his mother, met with Respondent after B.R. had been arrested for theft and unlawful use of credit cards. Respondent agreed to represent B.R. for a fee of $7500. Cheryl paid Respondent his requested fee. On October 8, 2001, Respondent contacted Assistant State's Attorney Kevin Johnson and discussed B.R.'s case. Johnson told Respondent that if B.R. gave a statement and cooperated with the police he would be considered for immunity. On October 10, 2001, Respondent, B.R., and Cheryl met with the police. B.R. gave a statement but the officer did not believe it was truthful.
On October 11, 2001, Cheryl discharged Respondent from representing B.R. and requested an accounting and a refund. Respondent refused to give Cheryl a refund. He sent Cheryl a letter stating that he completed his representation of B.R. when he made the agreement with the prosecutor. Cheryl obtained another attorney for B.R. Subsequently, a juvenile petition was filed against B.R. to which he pleaded guilty. B.R. was sentenced to probation. At no time did he cooperate with the police.
Respondent presented as experts four criminal defense attorneys, all of whom were personal friends of Respondent. They opined that the $10,000 fee in the Reents matter and
the $7500 fee in the B.R. matter were reasonable and need not have been refunded. The Administrator presented Michael Metnick as an expert. In his opinion, Respondent owed Reents a refund because of his limited involvement in the case and the speed with which the case was resolved. He believed that a refund of $5000 to $7500 was appropriate. Metnick also opined that Respondent should have refunded at least $5000 in the B.R. matter because he was discharged so early in the case and had nothing to do with the final disposition.
Hearing Board Reports and Recommendations
In Serritella I, the Hearing Board found that the fees Respondent charged Reents and B.R. were not unreasonable at the outset of the representation, based on Respondent's reasonable expectations at that time. However, because Reents' case was less serious than Respondent originally anticipated and he was discharged from B.R.'s case early on, he was not entitled to retain the full amount of the fees. The Hearing Board found that Respondent's retention of Reents' $10,000 fee was unconscionable. In the B.R. matter, it found that the retention of the $7500 fee was unreasonable but not necessarily unconscionable.
The Hearing Board further found that Respondent's actions violated Rule 1.16(e), Rule 8.4(a)(5), and Supreme Court Rule 771, but did not constitute dishonest conduct in violation of Rule 8.4(a)(4). In addition, it found that the Administrator did not prove by clear and convincing evidence that Respondent made false statements to the ARDC.
In Serritella II, the Hearing Board found that the Administrator did not meet her burden of proving by clear and convincing evidence that Respondent failed to promptly refund unearned fees or obtained an unreasonable fee in the Van Pelt matter.
The Hearing Board recommended that Respondent be censured and that he make restitution in the amounts of $7250 to Rhonda Reents and $3250 to B.R. or Cheryl R.
A. Denial of Respondent's Motion for Summary Judgment
We first address Respondent's argument that the Hearing Board erroneously denied his motion for summary judgment on Counts I and IV. The Administrator contends that the denial of Respondent's summary judgment motion is not reviewable on appeal. We agree with the Administrator.
In Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 199 Ill.2d 325, 770 N.E.2d 177, 264 Ill.Dec. 283 (2002), the supreme court noted that, as a general rule, the result of any error in denying a motion for summary judgment merges with the judgment entered at trial and, therefore, is not reviewable on appeal. "The rationale for this rule is that review of the denial order would be unjust to the prevailing party, who obtained a judgment after a more complete presentation of the evidence." Belleville Toyota, 199 Ill.2d at 355-56, 770 N.E.2d 177, 264 Ill.Dec. 283. Although our research has not uncovered a disciplinary case that applies this principle, we see no reason why this rule should not apply here. Accordingly, we decline to review the denial of Respondent's summary judgment motion.
B. Challenges to the Hearing Board's Factual Findings
Both Respondent and the Administrator raise challenges to the Hearing Board's findings. The Administrator bears the burden of proving the charges against Respondent by clear and convincing evidence. Supreme Court Rule 753(c)(6); In re Ingersoll, 186 Ill. 2d 163, 168, 710 N.E.2d 390 (1999). The Hearing Board is in a superior position to resolve factual questions because of its ability to observe the witnesses and assess their credibility. In re Smith, 168 Ill.2d 269, 283, 659 N.E.2d 896, 213 Ill.Dec. 550 (1995). Consequently, we give great deference to the Hearing Board's factual findings and will not disturb them unless they are
against the manifest weight of the evidence. Smith, 168 Ill.2d at 283, 659 N.E.2d 896, 213 Ill.Dec. 550. That standard is met only when the Hearing Board's finding is arbitrary, unreasonable, or is not based on the evidence. In re Jakubowski, No. 93 CH 455 (Review Board May 10, 1996) at 13, approved and confirmed, No. M.R. 12728 (Sept. 24, 1996).
1. Count I - The Reents Matter
Respondent asserts that the findings that he retained an unreasonable fee and failed to return unearned fees in both the Reents and B.R. matters are against the manifest weight of the evidence. Rule of Professional Conduct 1.5(a) identifies the following factors to consider when determining the reasonableness of a fee:
the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal services properly;
the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
the fee customarily charged in the locality for similar legal services;
the amount involved and the results obtained;
the time limitations imposed by the client or by the circumstances;
the nature and length of the professional relationship with the client;
the experience, reputation, and ability of the lawyer or lawyers performing the services; and
whether the fee is fixed or contingent.
Respondent argues that his experts were more knowledgeable and more persuasive than the Administrator's expert, and that the $10,000 fee Reents paid is a flat fee that he is entitled to keep regardless of how much time he spent on the matter.
We reject Respondent's argument that his experts' testimony establishes that the Hearing Board's findings were against the manifest weight of the evidence. The Hearing Board was under no obligation to accept the opinions of Respondent's experts, and apparently found the Administrator's expert to be more credible. Such a finding lies squarely within the province of the Hearing Board, and we decline to disturb it.
Moreover, we must disabuse Respondent of the notion that fixed fees need never be refunded. The Supreme Court has made it abundantly clear that a when the circumstances of an attorney's representation change such that the original fee, whether fixed or contingent, is no longer reasonable, the attorney is obligated to renegotiate the fee and return the portion that he is not entitled to retain. See In re Gerard, 132 Ill. 2d 507, 548 N.E.2d 1051, 139 Ill.Dec. 495 (1989); In re Teichner, 104 Ill.2d 150, 470 N.E.2d 972, 83 Ill.Dec. 552 (1984); In re Kutner, 78 Ill.2d 157, 399 N.E.2d 963, 35 Ill.Dec. 674 (1979).
In this matter, the Administrator presented evidence that the $10,000 fee was based on Respondent's belief that Reents might be charged with attempted murder and aggravated battery. However, the State's Attorney never filed such charges. Instead, according to Assistant State's Attorney Ogolin, the "rock-throwing" matter was transferred to deferred prosecution without any involvement from Respondent.
The evidence further showed that the police did not send the report for the driving incident to the State's Attorney's office for investigation. The State's Attorney did not even know about that incident until Respondent asked ASA Ogolin about "the attempted murder, attempted battery charges," which led Ogolin to examine the report and send it to the State's Attorney's Traffic Division. The Traffic Division declined to pursue any charges.
In determining that Respondent's retention of the $10,000 fee was not only unreasonable but unconscionable, the Hearing Board considered the factors set forth in Rule 1.5(a), and particularly the time and labor required, the fee customarily charged in the locality for similar services, and the results obtained. Serritella I, No. 03 SH 115, Hearing Board Report and Recommendation at 27. Respondent focuses primarily on his reputation, experience, and expertise, claiming that they led to the "spectacular results" for Reents. The Hearing Board found otherwise, however, determining that Respondent's representation of Reents had no effect on the outcome of her case. The Administrator presented evidence that Respondent collected $10,000 from Reents, spent about three hours on her case, and refused to refund any of the money after the matters resolved themselves without Respondent's intervention. This evidence is more than sufficient to support the Hearing Board's findings of misconduct as to Count I.
Next, we address the Administrator's argument that, contrary to the Hearing Board's finding, she proved by clear and convincing evidence that Respondent violated Rule 8.4(a)(4) by engaging in conduct involving dishonesty, fraud, deceit or misrepresentation during his representation of Reents. Specifically, the Administrator contends that Respondent engaged in constructive fraud by "scaring" Reents and her father into believing that she was facing serious criminal charges. The Hearing Board, however "[was] unable to find, based upon the evidence, that the Respondent's belief [about the possible charges] was either fraudulent or unreasonable at the time." Serritella I, No. 03 SH 115, Hearing Board Report and Recommendation at 26.
In Gerard, the supreme court held that the attorney's collection of almost $160,000 as a contingency fee for doing routine work recovering certificates of deposit constituted constructive fraud in the absence of any intent to defraud his client. Gerard, 132
Ill.2d at 528-29, 548 N.E.2d 1051, 139 Ill.Dec. 495. Unlike the instant matter, Gerard involved a contingent fee agreement. The respondent in Gerard did not actually collect the excessive fee until after he knew or should have known that the fee was unconscionable. Here, on the other hand, Respondent collected the $10,000 fixed fee from Reents on the day of their initial meeting, when Respondent was under the reasonable belief that her case would be more serious than it turned out to be. Because of these different circumstances, Gerard is distinguishable on the issue of constructive fraud.
The Administrator also contests the Hearing Board's finding that there was insufficient proof of a Rule 8.4(a)(4) violation based on Respondent's alleged statement to Reents that he had negotiated deferred prosecution for her. Respondent denied making such a statement, and the Hearing Board found that Reents' testimony was insufficient to prove the charge.
Reents testified that Respondent tried to take credit for the deferred prosecution. She also testified, however, that she was not sure what Respondent had said about the deferred prosecution because they were both very angry during their conversation. The Administrator asserts that Reents' weak testimony was bolstered by that of ASA Ogolin, who stated that Respondent referred to Reents as that "gal that we referred to the probation program." (Emphasis added.) This evidence falls far short of the clear and convincing burden of proof. The Hearing Board's finding on this issue was not against the manifest weight of the evidence.
2. Count II - Making False Statements to the ARDC
The Administrator challenges the Hearing Board's finding of insufficient proof on the charge of making false statements to the Administrator in connection with the Reents matter. The Administrator alleged that, in a letter to the ARDC, Respondent falsely stated that Reents
had admitted to committing criminal damage to property over $300, aggravated battery, and attempted murder. In his testimony before the Hearing Board, Respondent stated that Reents never specifically said that she was guilty of these crimes. Respondent explained that his letter was written in "conclusionary form," and that he was not trying to quote Reents but to convey the information that she gave him.
The Hearing Board was unable to find clear and convincing evidence that Respondent knowingly misrepresented his conversations with Reents. Rather, the Hearing Board found that "a miscommunication or misunderstanding was possible." Serritella I, No. 03 SH 115, Hearing Board Report and Recommendation at 34. The Hearing Board also found Respondent's explanation of his statement to be "reasonable." Serritella I, No. 03 SH 115, Hearing Board Report and Recommendation at 34. The Hearing Board's finding on this issue depends almost entirely upon its assessment of the parties' credibility and, therefore, is entitled to great deference. See Smith, 168 Ill.2d at 283, 659 N.E.2d 896, 213 Ill.Dec. 550. We will not substitute our own findings for those of the Hearing Board. While the Administrator disagrees with the inferences the Hearing Board drew from the evidence, she has provided no basis for us to conclude that they were arbitrary, unreasonable, or not based on the evidence.
3. Count III - The Van Pelt Matter
With respect to remanded Count III, the Administrator contends that the Hearing Board erroneously found that the evidence was insufficient to establish that Respondent failed to promptly return unearned fees and retained an unreasonable fee.
The Administrator argues that the evidence clearly and convincingly established that Respondent violated Rule 1.16(e) when he refused to refund any of Van Pelt's money for several days after she had requested a refund. Rule 1.16(e) provides that "[a] lawyer who
withdraws from employment shall refund promptly any part of a fee paid in advance that has not been earned." We agree with the Administrator that Respondent's position that his entire fee was non-refundable was incorrect under the circumstances at issue. Nonetheless, it is undisputed that Respondent returned $6000 to Van Pelt less than one week from when she initially met with him. We disagree with the Administrator that a period of several days is less than prompt. Rule 1.16(e) requires attorneys to refund unearned fees promptly, not immediately. The Hearing Board's finding that Respondent promptly returned the $6000 was not against the manifest weight of the evidence.
As for the remaining $1500, Respondent and Van Pelt disputed whether Respondent had earned those fees. The dispute was not resolved until the completion of the civil suit that Van Pelt filed. The Hearing Board found that Respondent's belief that he was entitled to those fees was reasonable. We give great deference to this factual determination. Although Respondent did very little work on Van Pelt's case, the amount that he retained was not so large as to lead us to conclude that the Hearing Board's finding was arbitrary or unreasonable. Thus, we affirm the Hearing Board's finding that it was not a violation of Rule 1.16(e) for Respondent to decline to refund $1500 in fees when Van Pelt discharged him.
Next, we address the reasonableness of the $1500 fee that Respondent retained. The Hearing Board found that the Administrator failed to prove a violation of Rule 1.5(a) because the amount Respondent retained was not unconscionable or grossly exorbitant. The Administrator asserts that the Hearing Board's findings were erroneous with respect to when Van Pelt discharged Respondent and whether Respondent was entitled to bill her for time he spent trying to convince her not to discharge him.
The law is clear that a client may discharge an attorney at any time, with or without cause. The attorney is entitled to quantum meruit compensation for all work that he reasonably performed for the client prior to the discharge. (Emphasis added.) Rhoades v. Norfolk and Western Ry. Co., 78 Ill.2d 217, 399 N.E.2d 969, 35 Ill.Dec. 680 (1979). The Hearing Board found that Respondent was discharged on April 22, 2002, while the Administrator maintains that the evidence established that he was discharged on April 18, 2002.
Van Pelt testified that she delivered a letter to Respondent's office on April 18, 2002, which indicated that she wanted to discharge Respondent and requested a refund. Respondent denied receiving the letter on April 18, and the Hearing Board found that the evidence did not clearly and convincingly establish that Respondent received the letter on April 18. It is undisputed that Respondent had a telephone conversation with Van Pelt on April 18 in which Van Pelt called Respondent a "thief" and a "crook" and demanded that he refund her money. Respondent testified that he did not believe that Van Pelt discharged him at that time.
In Gerard, the supreme court stated, in dicta, that it "assumed" that the attorney's receipt of a document from the client that revoked his assignment as co-trustee and demanded the return of all trust assets and an accounting "was the equivalent of a discharge although the respondent denies he was discharged." Gerard, 132 Ill.2d at 520, 548 N.E.2d 1051, 139 Ill.Dec. 495. Thus, the pertinent question when determining when a discharge is effective appears to be when the attorney becomes aware of the client's wish to discharge him or her.
We emphasize that it is not our role to substitute our judgment for that of the Hearing Board. Thus, even though it might appear to us that Respondent was unequivocally discharged on April 18 following his telephone conversation with Van Pelt, we did not observe the witnesses testifying and must rely on the Hearing Board's assessment of their credibility.
The Hearing Board found that Respondent "decided" that his representation of Van Pelt ended on April 22, 2002. The Hearing Board's use of the word "decided" is somewhat confusing, as the supreme court has clearly indicated that a client may discharge an attorney at any time, with or without cause. Therefore, we believe it is appropriate to clarify that when a client wishes to discharge an attorney, it is not for the attorney to "decide" when the representation ends. Rather, the representation ends when the attorney receives a clear communication from the client that he or she wishes to discharge the attorney. That said, we take the Hearing Board's statement to mean that the evidence established that April 22, 2002 was the first date on which Respondent knew with certainty that Van Pelt wished to discharge him. The Hearing Board's finding on this issue was based in large part on its assessment of Respondent's and Van Pelt's credibility in recalling their conversations between April 17, 2002, and April 22, 2002. In light of our deference to these findings, we cannot say that they are against the manifest weight of the evidence.
The Administrator further argues that it was improper for the Hearing Board to consider time that Respondent spent on the initial consultation, the letter he wrote and delivered to Van Pelt, and the telephone conversations he had with her when determining whether he obtained an excessive fee. Whether the fee Respondent retained was excessive necessarily depends on how much compensable time he spent on the matter. This issue was disputed, both in the circuit court and in this proceeding. The Hearing Board determined that Respondent could have reasonably believed that he was entitled to compensation for six hours of work. In the fee dispute litigation, the circuit court determined that Respondent was entitled to compensation for three and one-half hours of work. While the circuit court's decision is not binding in this proceeding, the Hearing Board appropriately considered it when assessing the
amount of Respondent's compensable time. Contrary to the Administrator's assertion, the Hearing Board did not accept the circuit court decision as conclusive on the issue of whether Respondent obtained an excessive fee.
We also reject the Administrator's argument that the Hearing Board erred when it allowed Respondent to testify that his consultation was not free if Van Pelt hired him, despite his admission in his Answer that he told Van Pelt that the consultation was free. In this Board's previous Report and Recommendation, we indicated that Respondent made a judicial admission that the initial consultation was free. The Hearing Board determined that Respondent's explanation of the initial consultation did not contradict his judicial admission. We agree with the Hearing Board that we did not intend to limit properly admissible testimony. Consequently, we find no error in the admission of Respondent's testimony regarding the initial consultation.
The fact that the circuit court ultimately decided that Respondent overcharged Van Pelt does not necessarily lead to the conclusion that his fee was unreasonable. As the Hearing Board noted, an attorney violates Rule 1.5(a) when the fee at issue is unconscionable. See Kutner, 78 Ill.2d at 163, 399 N.E.2d 963. While we can say with certainty that Respondent overestimated the amount of fees to which he was entitled, we cannot say that the Hearing Board made an arbitrary finding when it concluded that the $1500 fee Respondent retained was not unconscionable. This finding is supported by the evidence that the retained amount was relatively small, the parties had a fee dispute, and the amount of compensable time was unclear and somewhat difficult to determine. Accordingly, we affirm the Hearing Board's finding that the Administrator did not prove a violation of Rule 1.5(a) in the Van Pelt matter.
4. Count IV - The B.R. Matter
Respondent challenges the Hearing Board's finding that he had not completed his representation of B.R. at the time he was discharged and, consequently, was not entitled to keep his entire fee. On October 3, 2001, B.R., a juvenile, was arrested for possession of stolen computer items and unlawful use of a credit card. On October 4, 2001, B.R.'s mother, Cheryl R., paid Respondent his requested fee of $7500, which covered handling B.R.'s case "through to conclusion." When asked whether he informed Cheryl that his fee was non-refundable, Respondent answered that "it didn't come up." On October 8, 2001, Respondent spoke with Assistant State's Attorney Kevin Johnson, and discussed an agreement for disposing of B.R.'s case. According to Johnson, if B.R. made a statement to the police and cooperated with them, he would be considered for immunity. If he gave a statement and cooperated but the police were not satisfied with his conduct, "the worst that would happen to him * * * would be a petition in juvenile court with probation."
Respondent, Cheryl, and B.R. went to the police station on October 10, 2001, and, according to Respondent, B.R. decided not to cooperate. On October 11, 2001, Cheryl discharged Respondent, asked for an accounting, and requested a refund. Respondent refused to refund any of Cheryl's money, stating that he completed his job when he made the deal with the State's Attorney for possible immunity in exchange for B.R.'s cooperation. Respondent admitted, however, that he was prepared to take the case to trial after B.R. failed to cooperate, for no additional fee.
In October 2002, B.R. admitted to the allegations in a juvenile petition, was adjudicated delinquent for theft (a Class 3 felony) and was placed on probation. B.R. did not cooperate with the investigation prior to pleading guilty.
Respondent argues, without any citation to authority, that he completed his representation when he negotiated the agreement with the State's Attorney. The Hearing Board found this position inconsistent with his testimony that he had intended to handle the case through to trial after B.R. declined the "deal." The Hearing Board thus rejected Respondent's position and found that he was discharged before his representation of B.R. was completed. Based on Respondent's own testimony, the Hearing Board's finding was not against the manifest weight of the evidence.
The Hearing Board also rejected Respondent's theory that the deal he negotiated ultimately ended the case and saved B.R. from being charged as an adult. The Hearing Board found no evidence that B.R. gave any statement to or cooperated with the police prior to pleading guilty. In addition, the prosecutor testified that he had never considered prosecuting B.R. as an adult. This evidence was sufficient to support the finding that the ultimate disposition of B.R.'s case did not result from Respondent's brief efforts on his behalf.
Because Respondent was discharged before he completed the representation of B.R., he was entitled to payment only for the legal services he actually performed on B.R.'s behalf. See Smith, 168 Ill.2d 269, 293, 659 N.E.2d 896. The Hearing Board found that by retaining the entire $7500 fee for five hours of work, Respondent obtained an unreasonable fee in violation of Rule 1.5(a), failed to promptly refund unearned fees in violation of Rule 1.16(e), and engaged in conduct that is prejudicial to the administration of justice and that tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute, in violation of Rule 8.4(a)(5) and Supreme Court Rule 770. For the foregoing reasons, we affirm the Hearing Board's factual findings and findings of misconduct as to Count IV.
The Administrator contends that a one-year suspension, rather than the censure recommended by the Hearing Board, is an appropriate sanction for Respondent's misconduct. The Hearing Board's recommended sanction is advisory only. Teichner, 104 Ill.2d at 166, 470 N.E.2d 972, 83 Ill.Dec. 552. When considering what type of sanction is warranted, we view Respondent's misconduct in relation to "the underlying purposes of our disciplinary process, which purposes are to maintain the integrity of the legal profession, to protect the administration of justice from reproach, and to safeguard the public." Gerard, 132 Ill.2d at 539, 548 N.E.2d 1051, 139 Ill.Dec. 495. Although we strive to recommend similar discipline for similar misconduct, we must evaluate each case on its own unique facts. Gerard, 132 Ill.2d at 539-40, 548 N.E.2d 1051, 139 Ill.Dec. 495.
The Administrator relies on Gerard as support for a one-year suspension. Gerard's client, Ruth Randolph, hired Gerard to help her find certain certificates of deposit that were missing. Gerard and Randolph entered into a contingent fee agreement which provided that Gerard was to receive one-third of the assets he recovered for Randolph. When Gerard entered into the agreement with Randolph, he believed that recovering the certificates of deposit might require litigation. However, when he contacted the banks that issued the certificates of deposit, he learned that they were all safe in Randolph's account. Gerard then did some minimal administrative work to reregister each certificate of deposit in the name of a trust he had established for Randolph. He collected over $159,000 in fees, which the court deemed excessive. Gerard, 132 Ill.2d at 513-517, 548 N.E.2d 1051, 139 Ill.Dec. 495. The court ordered that Gerard be suspended for one year, based primarily on the need to maintain the integrity of
the legal profession and to safeguard the public, and Gerard's refusal to acknowledge that his fee was excessive. Gerard, 132 Ill.2d at 540-41, 548 N.E.2d 1051, 139 Ill.Dec. 495.
Like the Hearing Board, we conclude that the circumstances of this matter are not as egregious as those of Gerard. Gerard involved a much greater amount of money, and the attorney in that case took advantage of an elderly woman. Because we do not agree with the Administrator that she successfully proved the misconduct alleged in Count III, we cannot agree that Respondent engaged in a pattern of misconduct. The Administrator proved two incidents of misconduct that were separated in time by one year. While they were similar in nature, we do not believe that these two incidents justify the harsh sanction of a one-year suspension. Additionally, the respondent in Gerard did not actually collect the excessive fee until after he knew or should have known that the fee was unconscionable. Consequently, we decline to recommend a one-year suspension.
Unlike the Hearing Board, however, we believe that a short term of suspension is necessary in this matter in order to safeguard the public and maintain the integrity of the legal profession. While we do not consider Gerard controlling with respect to the length of the recommended sanction, the court's rationale for imposing a suspension rather than a censure applies here. The court explained that, "[w]ithout a suspension the integrity of the legal profession will be damaged in the minds of the public, especially because respondent's transgression was collecting an excessive fee and the public is particularly skeptical about the fees charged by attorneys, a fact we must recognize when determining the appropriate sanction." Gerard, 132 Ill.2d at 541, 548 N.E.2d 1051, 139 Ill.Dec. 495. The court further instructed that "[u]nethical conduct, especially in attorneys' relationships with clients, must not and will not be taken lightly." Gerard, 132 Ill.2d at 541, 548 N.E.2d 1051, 139 Ill.Dec. 495.
We have reviewed and considered other cases involving collecting unreasonable fees and failing to return unearned fees.
The respondent in In re Kutner, 78 Ill.2d 157, 399 N.E.2d 963, 35 Ill.Dec. 674 (1979), charged his client $5000 to defend him in a criminal battery charge. The charge was dismissed at the first court date, which the respondent did not attend. The court concluded that the $5000 fee for a simple battery case that never went to trial was unconscionable. Kutner, 78 Ill.2d at 166, 399 N.E.2d 963, 35 Ill.Dec. 674. The court censured Kutner. The instant case is more egregious than Kutner because it involved more than one instance of retaining an unreasonable fee and failing to return unearned fees. The respondent in Kutner also had more substantial mitigating circumstances than Respondent, including 49 years of practice without any other disciplinary complaints, and participation in many pro bono activities.
In In re Adelman, No. 93 CH 205 (Review Board, Sept. 18, 1995), approved and confirmed, No. M.R. 11790 (January 23, 1996), the respondent was suspended for six months for failing to return unearned fees to five clients, engaging in a pattern of misconduct regarding unearned fees, neglecting one case, and intentionally disregarding the decision of a CBA referral committee in two instances.
In In re Salerno, No. 93 CH 188 (Hearing Board, June 29, 1994), approved and confirmed, No. M.R. 10433 (Nov. 30, 1994), the respondent collected over $41,000 in fees for obtaining insurance proceeds on two uncontested claims. He was suspended for five months for collecting an excessive and unconscionable fee, engaging in conduct that tends to defeat the administration of justice or to bring the courts and the legal profession into disrepute, failing to promptly return unearned fees, and engaging in conduct that was prejudicial to the administration of justice.
The respondent in In re Johnson, No. 01 SH 53 (Hearing Board, April 1, 2002), petition for leave to file exceptions allowed, No. M.R. 18594 (March 19, 2003) was suspended for three months for collecting over $15,000 in fees in a "relatively routine probate matter" involving an estate with total assets worth about $37,000. The Hearing Board found that the respondent's fees were excessive not because of the hourly rate he charged, but because the number of hours he worked on the case was unreasonable and unnecessary.
Respondent engaged in serious misconduct which damages the public's trust in the legal system. This is compounded by Respondent's unprofessional conduct during the course of these proceedings -- specifically, referring to Rhonda Reents and B.R. as "harden [sic] criminals" (Respondent's initial brief at p. 14) and asserting that Reents was guilty of attempted murder (Respondent's initial brief at p. 12). Additionally, Respondent wrote a letter to Marianne Van Pelt, a third former client, in which he impugned her mental health. These are aggravating factors that convince us that a period of suspension is necessary to protect the public and maintain the integrity of the legal profession. While there are some mitigating factors in this case, including the lack of any prior discipline and positive character testimony, they do not significantly impact our recommendation.
In our view, Respondent's misconduct is not as egregious as that in Gerard, Adelman, Salerno and Johnson, but is more egregious than Kutner. Based on our consideration of all of the circumstances, we believe a thirty-day suspension is warranted.
Last, the Administrator takes issue with the Hearing Board's determination of the amount of quantum meruit compensation Respondent was entitled to retain in the Reents and B.R. matters. The Hearing Board found that Respondent was entitled to retain $2750 in the
Reents matter (consisting of a $2000 retainer and $750 for three hours of work) and $4250 in the B.R. matter (consisting of a $2000 retainer, $1250 for five hours of work, and $1000 "for his prompt and beneficial efforts on behalf of his client").
Citing In re Smith, 168 Ill.2d 269, 659 N.E.2d 896, 213 Ill.Dec. 550 (1995), the Administrator contends that it was improper for the Hearing Board to allow compensation beyond that for the actual time spent on the matter. We agree with the Administrator in part and disagree in part.
In Smith, the court held as follows:
Following discharge, a lawyer is not entitled to the full amount of fees agreed to between the lawyer and the client in contract. Instead, the lawyer is only entitled to be compensated on a quantum meruit basis for the legal services which the lawyer actually performed on the client's behalf. 168 Ill.2d at 293, 659 N.E.2d 896, 213 Ill.Dec. 550.
The Administrator interprets this to mean that the calculation of quantum meruit compensation ends after multiplying the attorney's hourly rate by the time spent on the matter. In In re Estate of Callahan, 142 Ill.2d 32, 41, 578 N.E.2d 985 (1991), however, the court held that a determination of the reasonable value of an attorney's services based on quantum meruit includes "the skill and standing of the attorney employed, the nature of the case and the difficulty of the questions at issue, the amount and importance of the subject matter, the degree of responsibility involved in the management of the case, the time and labor required, the usual and customary fee in the community, and the benefit resulting to the client."
Based on our understanding of Smith and Callahan, we conclude that Respondent is not entitled to keep a $2000 retainer in either the Reents or B.R. matter, because those amounts bear no discernible relationship to the actual services he provided. Whether it is customary for criminal defense attorneys to require retainers in similar amounts at the outset of a case is
irrelevant, because an attorney is not entitled to the contractual fee amount after he is discharged. However, the Hearing Board's finding that Respondent's prompt efforts on B.R.'s behalf were beneficial to B.R. is related to the value of Respondent's services. We interpret Callahan as providing authority for such compensation.
In the Reents matter, Respondent received a payment of $10,000. According to his own testimony, he performed three hours of work on the matter. The Hearing Board applied a rate of $250 per hour, and we have no reason to disagree with that rate. That said, because it became apparent early on in the case that the matter would be much less serious than Respondent initially thought, and because Reents resolved the matter herself without Respondent's involvement, we find no basis for allowing Respondent to keep any fees other than $750 for the three hours of time he spent.
In the B.R. matter, B.R.'s mother, Cheryl, paid Respondent $7500 to represent B.R. Respondent represented B.R. for eight days, after which time Cheryl discharged him. Respondent testified that he spent 4 or 5 hours on the case, which included having a conversation with the Assistant State's Attorney and attending a meeting with B.R. and a police officer.
We agree with the Hearing Board's recommendation that Respondent be allowed to retain $1250 for the five hours he spent on the case, plus, pursuant to Callahan, an additional $1000 for his prompt and beneficial efforts on B.R.'s behalf. However, we do not believe that he earned any additional amounts. As with the Reents matter, the case turned out to be less serious than Respondent predicted. Respondent advised B.R. and his mother that B.R. could be charged as an adult, but the evidence showed that this was never a real possibility. There was nothing unusual about the nature of B.R.'s case that would justify additional compensation, and the Hearing Board rejected Respondent's contention that he negotiated the deal that lead to the
disposition of B.R.'s case. Consequently, we conclude that Respondent's fees should be limited to $1250 for the five hours he spent plus an additional $1000 for his prompt attention to B.R.'s case.
For the foregoing reasons, we determine that (1) under the circumstances of this case, the retainer fees that the Hearing Board recommended that Respondent be allowed to retain are not related to the legal services that Respondent actually performed in the Reents and B.R. matters; (2) the reasonable value of Respondent's services to Reents is $750; and (3) the reasonable value of Respondent's services to B.R. is $2250. We therefore recommend that Respondent pay restitution in the amounts of $9250 to Reents and $5250 to B.R. or Cheryl R.
For the foregoing reasons, we recommend that the Hearing Board's factual findings and findings of misconduct be affirmed. We recommend that Respondent receive a suspension of thirty days and until he makes restitution to Rhonda Reents in the amount of $9250 and to B.R. or Cheryl R. in the amount of $5250.
Date Entered: April 9, 2007
Daniel P. Duffy