|FOR THE RESPONDENT |FOR THE INDIANA SUPREME COURT |
| |DISCIPINARY COMMISSION |
| | |
|Marce Gonzalez |Donald R. Lundberg, Executive |
|1000 East 80th Place |Secretary |
|Suite 502 North |Dennis K. McKinney, Staff Attorney |
|Merrillville, IN 46410 |115 West Washington Street, Suite 1165|
| |Indianapolis, IN 46204 |
IN THE
SUPREME COURT OF INDIANA
IN THE MATTER OF )
) CASE NO. 45S00-0109-DI-402
ROBERT E. STOCHEL )
DISCIPLINARY ACTION
August 8, 2003
Per Curiam.
This matter comes before the Court on the parties’ Statement of
Circumstances and Conditional Agreement for Discipline, pursuant to Ind.
Admission and Discipline Rule 23, Section 11(g). Respondent, Robert E.
Stochel, an attorney admitted to practice in this state in 1978, has been
charged by the Indiana Supreme Court Disciplinary Commission with lawyer
misconduct arising out of a fee dispute with a client in a contingent fee
case. We now find that the discipline agreed to by the parties, a public
reprimand, is appropriate, and herein set forth the facts and circumstances
of this case.
The parties agree that a client hired the respondent, after a
referral from another attorney, to handle litigation involving the estate
of the client’s mother. The respondent and the client agreed that the
respondent would take the case on a contingency basis, with the respondent
receiving a fee of forty percent (40%) of any recovery. The respondent did
not reduce this agreement to writing.
Ultimately, the respondent settled the client’s claim for
$180,000, payable $60,000 immediately, followed by four annual payments of
$30,000. The respondent calculated his total fee to be $72,000 (forty
percent of $180,000). Upon receipt of the initial $60,000 payment, the
respondent prepared a settlement statement for the client, which provided
that he would retain $50,000 toward his fee of $72,000 and the client would
receive $10,000. The settlement statement also informed the client that the
respondent would retain $11,000 from each of the next two $30,000 annual
payments to cover the balance of his fee. This resulted in the respondent
being paid in full before the client received the last $60,000 of the
agreed settlement.
From the $50,000 attorney fee the respondent withheld from the
initial $60,000 installment of the settlement, the respondent paid the
referring attorney $16,000.
Indiana Professional Conduct Rule 1.5(e) prohibits a division
of fee among lawyers who are not in the same firm, unless:
1) the division is in proportion to the services performed by each
lawyer or, by written agreement with the client, each lawyer
assumes joint responsibility for the representation;
2) the client is advised of and does not object to the participation
of all the lawyers involved; and
3) the total fee is reasonable.
The parties agree that: (1) the respondent and the referring attorney were
not members of the same firm; (2) the payment was neither proportional to
the services performed by each attorney nor pursuant to a written agreement
with the client under which each attorney assumed joint responsibility for
the representation; and (3) the client was neither advised of nor consented
to the division of the fee. The parties concede that other than his
initial consultation with the client, for which he received a fee of $250,
the referring attorney had no other contact with the client or the
litigation. The client ultimately sued the respondent and the claim was
settled by the respondent paying the client the amount paid to the
referring attorney. We find that the respondent violated Prof.Cond.R.
1.5(e).
Professional Conduct Rule 1.5(c) requires that contingent fee
agreements be in writing and state the method by which the fee is to be
determined. Professional Conduct Rule 1.5(b) requires the basis or rate of
a fee be communicated, preferably in writing, to a client that the attorney
does not regularly represent. We find that the respondent, by failing to
reduce his contingent fee agreement with the client to writing and by
failing to communicate the rate or basis of the fee to his client, violated
these provisions.
We also find that the respondent violated Prof.Cond.R. 1.5(a),
which prohibits an attorney from charging an unreasonable fee. The fee
agreement called for the respondent to receive a contingent fee of 40%, yet
upon receipt of the first payment, the respondent retained in excess of 83%
of the funds received as his fee. Though in the end the respondent’s fee
represented only 40% of the total settlement, the respondent initially
denied the client of the use and benefit of funds he was entitled to
receive. The respondent’s collection of over 80% of the initial settlement
proceeds was contrary to the parties’ agreement and unreasonable. In a
similar case, where the contingent fee agreement called for a total fee of
ten percent (10%), we found that the retention of $50,000 from initial
payments totaling $100,000 in a structured settlement totaling $550,000 was
unreasonable. Matter of Myers, 663 N.E.2d 771 (Ind. 1996). Absent a
contrary written agreement between the lawyer and the client, attorneys
fees should be taken only as settlement proceeds are received. Restatement
(Third) of the Law Governing Lawyers, Section 35(2) (providing that “Unless
the contract construed in the circumstances indicates otherwise, when a
lawyer has contracted for a contingent fee, the lawyer is entitled to
receive the specified fee only when and to the extent the client receives
payment.”).
Having found misconduct, we must now assess the appropriateness
of the agreed sanction, a public reprimand. It is clear that the
respondent’s failure to reduce the terms of the contingent fee arrangement
to writing led to the confusion regarding the payment of his fee. This
failure also was responsible for the client not knowing or consenting to a
division of the attorney fees. As we have noted previously:
Lawyers are obligated to act with an allegiance to the interests of
their clients. Most clients must pay lawyers engaged in private practice
for their services, thus creating a risk of conflicting economic
interests. Lawyers almost always possess the more sophisticated
understanding of fee arrangements. It is therefore appropriate to place
the balance of the burden of fair dealing and the allotment of risk in
the hands of the lawyer in regard to fee arrangements with clients.
Myers, 663 N.E.2d at 774.
Because we favor agreed resolutions of disciplinary charges, we
accept the parties’ agreed sanction of a public reprimand. However, we
note that in the future it will be appropriate in such cases to impose
greater sanctions, including, but not limited to, restitution to the client
of the economic value of the loss of the use and benefit of funds
rightfully belonging to the client.
The respondent, therefore, is hereby reprimanded and admonished
for the misconduct set out above.
The clerk of this Court is directed to provide notice of this
order in accordance with Admis.Disc.R. 23(3)(d) and the hearing officer in
this matter, and to provide the clerk of the United States Court of Appeals
for the Seventh Circuit, the clerk of each of the United States District
Courts in this State, and the clerk of each of the United States Bankruptcy
Courts in this state with the last known address of the respondent as
reflected in the records of the clerk.
Costs of this proceeding are assessed against the respondent.
DICKSON, SULLIVAN, BOEHM and RUCKER, JJ., concur.
SHEPARD, C.J., concurring. I have voted to approve this sanction only
because it comes to us in the form of an agreement. If it came to us as a
litigated case, I would vote for a suspension.