FOR THE RESPONDENT FOR THE INDIANA SUPREME COURT
DISCIPLINARY COMMISSION
Gordon A. Etzler Donald R. Lundberg, Executive Secretary
Hoeppner Wagner & Evans 115 West Washington Street, Suite
1165
Valparaiso, IN Indianapolis, IN 46204
IN THE
SUPREME COURT OF INDIANA
______________________________________________________________
IN THE MATTER OF )
) Case No. 98S00-0006-DI-390
WILLIAM K. HEFRON )
__________________________________________________________________
DISCIPLINARY ACTION
__________________________________________________________________
July 29, 2002
Per Curiam
Attorney William K. Hefron agreed to represent a client on an hourly
basis to recover assets belonging to an estate. Upon learning that
substantial assets could be easily recovered, he insisted the client sign a
new fee agreement under which the respondent would receive a significant
percentage of the value of the recovered assets, as well as a percentage of
the value of the estate. For this professional misconduct, we suspend the
respondent from the practice of law in Indiana for six months.
Having been admitted to the bar in this state in 1989, the respondent
is subject to our disciplinary jurisdiction. We appointed a hearing
officer, who determined that the Commission proved by clear and convincing
evidence that the respondent violated Ind. Professional Conduct Rules
1.5(a), which prohibits attorneys from charging an unreasonable fee, and
1.8(a), which
prohibits renegotiation of an attorney fee absent certain protections for
the client. The respondent, pursuant to Ind. Admission and Discipline Rule
23(15), filed a Petition for Review of the hearing officer’s report. The
Commission responded, arguing that the respondent’s failure to cite to the
record is fatal to his allegations of errors in the hearing officer’s
findings. In his reply, the respondent notes that the Ind. Rules of
Appellate Procedure do not govern briefs in disciplinary matters,
reiterates his allegations of errors, but still fails to provide consistent
citations to the record to support those claims.
Our review of disciplinary cases is de novo in nature, and we will
review the entire record presented. Matter of Tsoutsouris, 748 N.E.2d 856
(Ind. 2001). The hearing officer’s findings receive emphasis due to the
hearing officer’s unique opportunity for direct observation of witnesses,
but this Court reserves the right to make the ultimate determination. Id.
Although the formal briefing requirements within the Indiana Rules of
Appellate Procedures are not binding in an attorney discipline action, a
party seeking review of the hearing officer’s report must present to this
Court a record, authority, and cogent argument. Matter of Cook, 526 N.E.2d
703 (Ind. 1988); Ind. Admission and Discipline Rule 23(15). Where a party
cites law or facts within the record, the party should provide appropriate
citations. Matter of Cook, 526 N.E.2d at 705.
As a preliminary matter, the respondent challenges the hearing
officer’s appointment as a violation of due process. He contends that the
hearing officer should not have served because he: 1) is an attorney
subject to the same rules and regulations as the respondent and 2) serves
as legal advisor to the Indiana State Police. The respondent further
suggests the hearing officer was biased because he was paid by the
Disciplinary Commission and chosen from a list maintained by the
Commission. The respondent concedes Admis.Disc.R. 23(14)(a) authorized the
respondent to seek a change of hearing officer upon a showing of good cause
within 10 days after the hearing officer’s appointment and that he did not
seek such a change until late in the proceeding. The respondent excuses
his untimeliness by claiming the 10-day period is unconstitutionally brief.
The respondent fails to provide cogent argument or to cite to any
supporting authority, including the constitutional provisions upon which he
relies. Nonetheless, we note that hearing officers in disciplinary cases
are chosen and appointed by this Court without input from the Commission.
Hearing officers are paid from Supreme Court funds. Our rules of procedure
provide that appointment of lawyers as hearing officers in disciplinary
proceedings is appropriate. Admis.Disc.R. 23(11)(b). In the context of an
attorney disciplinary action, due process requires notice and an
opportunity to be heard in a fundamentally fair proceeding. Matter of
Wireman, 367 N.E.2d 1368, 270 Ind. 344 (Ind. 1977). The respondent does
not specify how the hearing officer’s status as a lawyer or his association
with the Indiana State Police prevented him from fulfilling impartially his
duties as a hearing officer nor does the respondent establish any other
unfairness in the proceeding. Accordingly, we reject the respondent’s due
process claim.
We find the respondent agreed to represent a client in identifying and
recovering assets belonging to the estate of her deceased sister. The
respondent initially refused to represent the client on a percentage basis.
They agreed on March 2, 1995, to a fee of $110 per hour, with a retainer
of $2,000 to be paid in advance, but the agreement was not reduced to
writing.
In March and April 1995, the respondent performed little work in the
case, but the client worked extensively to find the assets and reported all
of her findings to the respondent. On April 24, 1995, the respondent wrote
to the client’s sister demanding that she return assets properly belonging
to the estate. On May 1, 1995, the respondent met with counsel for the
client’s sister who assured the respondent that his client would cooperate
in any effort to identify, collect and administer assets. The respondent
gave opposing counsel a lengthy list of suspected assets derived from the
client’s investigation, and opposing counsel promised a report and
accounting soon.
Two days later the client met with the respondent, who presented the
client with a written contingent fee calling for a fee of 33-1/3 percent.
The client refused to consider such an agreement. The respondent revised
the fee agreement to provide for a fee of 21 percent of all assets he
recovered for the estate and, in addition, 4 percent of the value of the
estate for representing the client, as personal representative, in
administering it. The respondent told the client that he was unwilling to
perform any further work in the case without a signed contingent fee
agreement because he expected the case would go to trial and that it would
be a long and difficult battle. The client agreed to consider the contract
and left the respondent’s office that day without signing it. During the
next six weeks, the respondent contacted the client on several occasions
and reiterated his unwillingness to proceed with the representation absent
a signed contingency fee contract.
On June 13, 1995, opposing counsel delivered a partial accounting of
estate assets which proposed that the client’s sister return $236,000 in
assets to the estate, along with unvalued stock certificates and securities
in 13 companies which were later valued at slightly less than $120,000.
The respondent did not inform the client about this development until after
the client signed the contingency fee agreement and delivered it to the
respondent’s office on June 22, 1995. On June 29, 1995, opposing counsel
provided another accounting to the respondent proposing that the client’s
sister return $363,436.37 in liquid assets, plus the still unvalued stock
certificates and securities listed in the prior accounting. Opposing
counsel also offered to have the client’s sister compensate the estate for
any actual earned interest and imputed interest unearned by the estate as a
result of the actions of the client’s sister. Ultimately, the value of all
assets listed in that second accounting exceeded $480,000.
Also on June 29, 1995, when the estate was still an unsupervised
special administration, the respondent filed a motion seeking judicial
approval of the contingency fee contract and tendered a draft order
approving the contract. The respondent did not disclose in his motion that
he already had received a draft accounting from opposing counsel and an
offer to transfer those assets to the estate voluntarily. The probate
court approved the contract on the same day without hearing. The client
was unaware the motion was to be filed, was not given advance notice or any
opportunity to attend, and was not served with the order approving the fee
agreement.
On July 21, 1995, at approximately 11:09 a.m., after the estate had
been converted from an unsupervised special administration to a supervised
estate, the respondent filed another motion seeking judicial approval of
the same contingency fee contract and tendered a draft order approving that
contract. The respondent did not disclose in his motion that later that
day he was scheduled to receive from opposing counsel all of the assets set
forth in the accounting. The probate court again approved the contract the
same day the motion was filed without a hearing. Once again, the client
was not aware the motion was to be filed and was not served with the signed
order. The transfer of assets occurred as scheduled later that day,
and the respondent, in turn, delivered the assets to the client, as
personal representative for the estate.
Without any advance notice to the client or the other heirs of the
estate, the respondent on August 2, 1995, filed a motion to approve his
collection of attorney fees under the contingent fee agreement. The court
granted the motion on the same day without hearing. The order was not
served on the client or any other heirs of the estate.
Later that day, the respondent informed the client that the court had
ordered payment of $76,531.64 in attorney fees to him. That represented 21
percent of the liquid asserts returned by opposing counsel but did not
include a percentage of the value of the unvalued stocks and securities.
After seeking advice from independent legal counsel, the client discharged
the respondent. The respondent filed a motion to withdraw and sought
additional fees of $25,123.50, representing 21 percent of the value of the
previously unvalued stocks and securities. The client’s new counsel
objected to the fees as excessive and contrary to law. The respondent’s
time sheets reflected 48 hours of work performed in the case by the
respondent between the date of his hiring and the date of his discharge.
The probate court conducted a hearing in the matter and reduced the
respondent’s fees to $40,000. The court also rejected the respondent’s
claim for the additional $25,123.50 in fees. The Indiana Court of Appeals
affirmed the probate court in a memorandum decision. Kovacich v. Hefron,
case number 64A03-9907-269 (Ind.App. 2000).
We find the respondent violated Prof.Cond.R. 1.5(a) by charging an
unreasonable fee.[1] The respondent billed the estate $101,544.14,
though the matter essentially was uncontested and he could document only 48
hours of work on the client’s behalf.[2] Although the respondent appears
to suggest that the probate court affirmed the reasonableness of his fee,
the court made a contrary finding. It determined the respondent committed
constructive fraud by failing to disclose the opposing side’s cooperation
to the client before her return of the signed fee agreement. In reducing
the respondent’s fees to $40,000 – slightly more than half of what the
respondent already had collected and less than 40 percent of what he billed
-- the probate court found:
The recovery of estate assets was ultimately not a difficult
or time consuming undertaking. At the time the contingency
contract was signed(,) Hefron then knew that he would recover
very substantial sums of money without litigation. As the
matter
was a simple one, it did not preclude Hefron from undertaking
other employment.
Commission’s Exhibit 47, at 9-10.
We further note the amount the respondent billed was nearly 20 times
more than the $5,280 he would have received under the original fee
agreement, which called for an hourly rate of $110 per hour for the 48
hours of work.
We have stated that a lawyer who, after entering into a contingent fee
agreement with a client, ascertains that recovery by the client will be
simple and uncontested, should renegotiate the fee, rather than accept an
inflated contingency fee. Matter of Gerard, 634 N.E.2d 51 (Ind. 1994). In
this case, the respondent, by insisting on a fee which totaled
approximately 25 percent of the value of the estate, charged an
unreasonable fee in violation of Prof.Cond.R. 1.5(a).
We further find the respondent violated Prof.Cond.R. 1.8(a) by
renegotiating the fee agreement unfairly. Prof.Cond.R. 1.8(a) provides:
A lawyer shall not enter into a business transaction with a
client or knowingly
acquire an ownership, possessory, security or other pecuniary
interest
adverse to a client unless:
1) the transaction and terms on which the lawyer acquires the
interest
are fair and reasonable to the client and are fully disclosed
and
transmitted in writing to the client in a manner which can be
reasonably understood by the client;
2) the client is given a reasonable opportunity to seek the
advice of
independent counsel in the transaction; and
(3) the client consents in writing thereto.
The respondent makes two arguments in support of his claim that he did
not violate Prof.Cond.R. 1.8(a). First, he claims the contingency fee
agreement was not a business transaction with a client. He asserts the
parties agreed at the onset of the representation to two fee agreements –
an hourly rate until assets were discovered and a contingency fee
afterward. Therefore, the respondent reasons, no new fee agreement was
negotiated after the representation began and Prof.Cond.R. 1.8(a) does not
apply.
While the evidence as to the fee agreements was conflicting, the
respondent’s admissions contradict his claim that no fee agreement was
negotiated after the representation began. The respondent concedes that
prior to May 3, 1995, the terms of the fee agreement(s) had not been
reduced to writing. He also acknowledges that the client on or around May
1, 1995, rejected the respondent’s insistence on a fee of one-third of the
value of the estate assets and that the terms of the contingency fee
agreement were negotiated on May 3, 1995.
The respondent further concedes he billed at an hourly rate for the
first two months of the representation but later refunded those fees after
seeking payment pursuant to the contingency fee agreement. Such actions
suggest that the contingency fee agreement was a substitute for, not a
supplement to, the hourly billing agreement.
The probate court, in determining that the contingency fee agreement
was the result of undue influence by the respondent, found that “(t)he
contingency fee arrangement and contract was suggested, prepared,
negotiated and finally signed while an attorney-client relationship
existed.” Commission’s Exhibit 47, pp. 7-8. We find the evidence in this
case supports that finding and conclude the respondent’s negotiation of the
contingency fee agreement with the client constituted a “business
transaction” to which Prof.Cond.R. 1.8(a) applies.
The respondent also asserts that the transaction was fair to the
client and, therefore, not prohibited by Prof.Cond.R. 1.8(a). He contends
the fee agreement negotiations were concluded on May 3 and that as of that
date, only one specific asset – an $84,000 bank account – had been
identified. The respondent also claims the opposing side’s cooperation was
uncertain until he received the letter and accounting from the opposing
counsel on June 29, 1995 – a week after he received the signed fee
agreement from the client. He claims his refusal to perform any further
work in the case until the client signed the contingency fee agreement was
not an attempt to coerce the client but, rather, his diligent effort to
comply with Prof.Cond.R. 1.5(c), which requires that contingency fee
agreements be reduced to writing.
The evidence establishes that the respondent’s motivation for his
renegotiation of the fee agreement was his own pecuniary gain and that he
withheld information from both the client and the probate court in his
effort to procure his unreasonable fee. The respondent insisted on an
hourly rate when recovery was not assured but coerced his client into
acquiescing in a contingency fee agreement once the likelihood of a
substantial recovery arose. Though the opposing side on May 1, 1995,
pledged its cooperation and promised a full accounting, the respondent
represented to his client on May 3 that litigation was likely. In fact,
the respondent did not inform the client of the opposing side’s cooperation
until after the client returned the signed fee agreement on June 22, 1995.
The respondent also omitted essential facts when he petitioned the probate
court for approval of the fee agreement and his fee. The probate court
ruled that the respondent did not disclose “the circumstances relating to
or existing, concerning the execution of the attorney fee contract,
collection of assets or administration of the estate. . . ” including that
opposing counsel was scheduled to deliver estate asserts to the respondent
later that day. Commission’s Exhibit 47, p. 5. This evidence establishes
that both the contingency fee agreement and the circumstances under which
it was negotiated and approved were unfair. Indeed, they amount to a clear
violation of Prof.Cond.R. 1.8(a).
Even if the terms of the renegotiated fee agreement were fair and
fully disclosed in writing as Prof.Cond.R. 1.8(a) requires, the respondent
nonetheless did not give his client a reasonable opportunity to seek the
advice of independent counsel in the transaction.
Having found misconduct, we must now assess an appropriate discipline
for it. The respondent’s insistence on an unreasonable fee negotiated
unfairly led to additional court proceedings and, ultimately, an appeal.
He omitted or misrepresented essential facts in his presentations to his
client and the probate court to secure the unreasonable fee. Where an
attorney has obtained a more lucrative fee agreement through fraud, we have
determined that a suspension from the practice of law is appropriate.
Matter of Thayer, 745 N.E.2d 207 (Ind. 2001). Accordingly, the
respondent, Willaim K. Hefron, is hereby suspended from the practice of law
in this state for six months, effective September 7, 2002, after which he
shall be automatically reinstated.
The Clerk of this Court is directed to provide notice of this order in
accordance with Admis.Disc.R. 23(3)(d) 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 clerks of the
United States Bankruptcy Courts in this state with the last known address
of respondent as reflected in the records of the Clerk.
Cost of this proceeding are assessed against the respondent.
-----------------------
[1] In determining the reasonableness of a fee, we consider the
following:
1) the time and labor required, the novelty and difficulty of
the
questions involved, and the skill requisite to perform the
legal
service properly;
2) the likelihood, if apparent to the client, that the
acceptance of
the particular employment will preclude other employment by
the
lawyer;
3) the fee customarily charged in the locality for similar legal
services;
4) the amount involved and the results obtained;
5) the time limitations imposed by the client or by the
circumstances;
6) the nature and length of the professional relationship with
the client;
7) the experience, reputation, and ability of the lawyer or
lawyers
performing the services; and
(8) whether the fee is fixed or contingent.
Prof.Cond.R. 1.5(a).
[2] The respondent testified that he typically did not record hours worked
in contingent fee cases. He also asserted that the hourly billings he
submitted to the client for work on her behalf in March and April 1995 were
not complete – that he performed additional, unspecified, undocumented work
on behalf of the client. He did not explain why he submitted a written
bill to her detailing hourly charges for part of his work in that two-month
period but failed to note or charge her for other work.