FOR THE RESPONDENT FOR THE INDIANA SUPREME COURT
DISCIPLINARY COMMISSION
James H. Kelly Donald R. Lundberg, Executive
Secretary
Taylor Law Office David B. Hughes, Staff Attorney
4318 E. 10th Street 115 West Washington Street,
Suite 1165
Indianapolis, IN 46201 Indianapolis, IN 46204
IN THE
SUPREME COURT OF INDIANA
______________________________________________________________
IN THE MATTER OF )
) Case No. 49S00-9708-DI-443
PATRICK R. TAYLOR )
__________________________________________________________________
DISCIPLINARY ACTION
__________________________________________________________________
February 12, 2001
Per Curiam
The respondent, Patrick R. Taylor, agreed to handle a client’s
dissolution for approximately $2,500. Although the divorce court
determined that the client’s attorney fees should not have exceeded $3,500,
the respondent billed the client nearly $13,000 and required her to
transfer her $17,000 interest in the marital home to him as payment for
about $9,000 in legal fees. The respondent failed to disclose the full
terms of the transaction, to advise his client to seek the advice of
independent counsel or to obtain her written consent to it. For this
professional misconduct, we suspend the respondent from the practice of law
in Indiana for no fewer than 24 months.
Having been admitted to the bar of this state in 1968, the respondent
is subject to our disciplinary jurisdiction. A hearing officer was
appointed to this case, and, after a hearing, tendered his report to this
Court. The hearing officer determined the respondent committed the charged
misconduct. The respondent, pursuant to Ind.Admission and Discipline Rule
23(15), has filed a Petition for Review and an amended Petition for Review
of the hearing officer’s report. Both petitions challenge the hearing
officer’s factual findings and evidentiary rulings. Our review of
disciplinary cases is de novo in nature, and we will review the entire
record presented. Matter of Cherry, 715 N.E.2d 382 (Ind. 1999). 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. Matter of Smith,
572 N.E.2d 280 (Ind. 1990).
Within that review framework, we now find that when the respondent
began representing the client in the pending dissolution, the marital
estate totaled approximately $66,000. The two principal assets of the
marriage were the pension plan of the former husband and the parties’
jointly-owned residence in which the client lived. The home had been
purchased for $14,000 in 1983, and the parties believed it had a fair
market value of $25,000 at the time of the dissolution. A professional
appraisal obtained by the former husband reflected a value of $20,600 for
the home and indicated the need for physical improvements.
The dissolution action included disputes over child custody, spousal
maintenance and rehabilitative maintenance for the client, who was
disabled, unable to work, and without any income or savings. The
respondent told the client that his fees for the dissolution would be about
$2,500 and that her husband would be asked to pay such fees. The client
believed she likely would not be responsible for payment of any attorney
fees. In a letter to the client, the respondent specified his hourly rate
as $120 and the hourly rate of his associates as $100. The letter did not
set forth, and the respondent never explained to the client, what services
would be billed, how charges would be computed, or the frequency with which
she would receive bills. From the date of the respondent’s appearance in
the dissolution on January 12, 1989, through the date of the final hearing
on February 9, 1990, the respondent never prepared or sent the client any
interim billings. The client was unaware of how the fees were escalating
during the respondent’s representation of her. She also was unaware of the
services for which she was being charged. For instance, the client did not
know that the respondent was charging her a minimum $30 for each phone call
she placed to him.
During trial in February 1990, the respondent offered into evidence an
itemized statement of his services totaling $12,696. The trial court
awarded the home to the client and ordered her husband to pay a total of
$3,500 toward her attorney fees, stating:
That in making the award of $3,000.00 in attorney’s fees,
the Court has taken into consideration the overall assets
of the marriage and has also taken into consideration
problems that have existed with respect to this matter
which were caused by the (client). The Court believes that
given the issues in this case and the net assets involved in
this case that attorney’s fees should not have exceeded the
sum of $3,500.00, and the award of $3,000.00 coupled
with a preliminary award of $500.00 which has been paid,
the Court feels that any fees over and above this amount
should be paid by the (client).
At the respondent’s request, the client on March 12, 1990, executed a
promissory note in favor of, and prepared by, the respondent in the sum of
$9,196.00. That figure represented the balance of her attorney fees after
the former husband’s payment of $3,500. The note provided for interest at
12 percent annually, attorney fees and costs of collection. It also
provided that all sums were due without relief from valuation and
appraisement laws.
The respondent also requested the client execute an Assignment of
Installment Contract for the Sale of Real Estate in his favor. The
assignment provided that the client “assigns all her right, Title and
interest in the (marital residence) as security for a certain promissory
note entered into on the 12th day of March, 1990.” At that time, using
the home’s appraised value, the client had about $17,000 of equity in the
home.[1] The respondent did not advise the client to seek the advice of
independent counsel with respect to the transfer. He also did not disclose
to the client the terms of the note and assignment transaction or obtain
the client’s written consent to those terms.
On April 25, 1990, the respondent obtained the client’s signature on
a quitclaim deed he had prepared transferring all of her interest in the
marital home to him. Again, the respondent did not advise the client to
consult independent counsel, failed to disclose the terms of the
transaction to her in writing, and failed to obtain the client’s written
consent. Six months later, the respondent sold the property to a third
party for $25,000 and did not return any portion of that amount to the
client.
In his Petitions for Review, the respondent argues that his failure to
provide interim billing to the client was not misconduct. He testified
that the client and he regularly discussed the escalating fees and that he
was not obligated to provide interim billing, in part because the client
had no means to pay the bill. While interim billing may not per se be
required during every representation, the respondent’s failure to do so in
this case amounted to a lack of adequate communication with his client, as
required by the Rules of Professional Conduct, given the amount by which
the respondent’s actual fees exceeded his initial projections, the client’s
expectation that she would not have any out-of-pocket legal expenses, and
the presence of only two significant assets in the marital estate, neither
of which was liquid. Failure to keep a client apprised of escalating fees
may constitute a violation of Prof.Cond.R. 1.4. See, e.g., Matter of
Grimm, 674 N.E.2d 551 (Ind. 1996) (attorney violated Prof.Cond.R. 1.4(a)
when he represented that attorney fees were taken care of after the first
invoice but submitted a substantial bill for legal services at conclusion
of representation). The client’s inability to pay the fees was a reason to
provide interim billing, not a justification for avoiding them; the
importance of limiting her legal fees and the likelihood that the cost of
attorney services would impact strategic decisions regarding the
representation would have increased as the attorney bills mounted.
Accordingly, we find that the respondent violated Ind.Professional Conduct
Rule 1.4(a) by failing to provide notice or information to the client of
her escalating legal bills.[2] As a consequence of that omission, the
respondent failed to keep the client adequately informed about the status
of her case to the extent reasonably necessary to permit her to make
informed decisions regarding the representation, in violation of
Prof.Cond.R. 1.4(b).[3]
We further find that the respondent violated Prof.Cond.R. 1.8(a) by
knowingly entering into business transactions with the client without
taking steps to ensure that the transactions were fair and reasonable to
the client. Specifically, the respondent acquired an interest in the
client’s property adverse to the client without disclosing the terms of
those transactions in writing, advising or allowing the client to seek
independent counsel, or obtaining the client’s written consent, all in
violation of Prof.Cond.R. 1.8(a).[4] The respondent contends that
Prof.Cond.R. 1.8(a) does not apply, as he and the client were merely
settling their accounts in an appropriate manner. The respondent is
incorrect. Prof.Cond.R. 1.8(a) expressly governs transactions where the
attorney knowingly acquires an ownership, possessory, security or other
pecuniary interest adverse to the client. By obtaining a security interest
in, and then ownership of, the client’s home, the respondent knowingly
acquired a pecuniary interest adverse to the client within the meaning of
Prof.Cond.R. 1.8(a). See, e.g., Matter of Davis, 740 N.E.2d 855 (Ind.
2001) (1.8(a) violation where, at attorney’s suggestion, client transferred
her interest in home and other property to attorney without being advised
of adverse consequences or to seek independent counsel). In fact,
Prof.Cond.R. 1.8(a) is specifically designed to protect clients against the
very abuse which occurred here. The Rules of Professional Conduct place
restrictions on business transactions between lawyers and their clients
based on an assumption that the lawyer in such dealings will generally
possess, for various reasons, an unfair advantage in bargaining position.
Matter of Horine, 661 N.E.2d 1206 (Ind. 1996). In this case, the
respondent managed to persuade the client to transfer property in which she
had equity of at least $17,000 to satisfy a debt of $9,200.
The respondent argues that the transfer of the property was not fair
or reasonable to him, not the client. He asserts he ultimately lost money
on the transaction, given the time, money and materials he invested in
rehabilitating and selling the property. The evidence is undisputed that
the client owed $3,200 on the property at the time of the transfer and that
the respondent paid that debt in full before selling the property. The
respondent’s tax returns showed he invested an additional $4,000 in the
property before selling it for $25,000. That left him with a net profit on
the property of at least $17,800 – almost double what the client owed him
in legal fees. Even if the ultimate selling price of the property is
disregarded and only the lowest appraised value of the property ($20,600)
at the time of the transfer to the client is considered, it is clear the
respondent unduly profited from the transaction by accepting property with
a net worth of $17,400 (appraised value of $20,600 minus the $3,200 owed by
the client on the property) to pay a $9,000 legal bill. Thus, we find
that the respondent’s transaction with his client divested her of much more
than she owed him.
Given our finding of misconduct, we must determine an appropriate
sanction. In doing so, we consider the misconduct, the respondent’s state
of mind underlying the misconduct, the duty of this court to preserve the
integrity of the profession, the risk to the public in allowing the
respondent to continue in practice, and any mitigating or aggravating
factors. Matter of Mears, 723 N.E.2d 873 (Ind. 2000).
The respondent took advantage of his client for personal gain, billing
her nearly five times the amount he estimated the representation would
cost, failing to advise her of the mounting legal fee, and then ultimately
obtaining her residence in satisfaction of his fee. The respondent
unfairly took advantage of his superior bargaining position to the
significant detriment of his client. In the end, his unemployed and
disabled client lost her only significant asset to satisfy an attorney’s
bill she did not believe she would ever have to pay.[5]
We note as aggravating circumstances the respondent’s significant
disciplinary history and his failure to acknowledge any wrongdoing. See
Matter of Taylor, 293 N.E.2d 779 (Ind. 1979) (respondent suspended for not
less than two years for suborning perjury); Matter of Taylor, 525 N.E.2d
286 (Ind. 1988) (public reprimand for failing to return case file materials
to client); Matter of Taylor, 693 N.E.2d 526 (Ind. 1998) (120-day
suspension for advising stepmother to waive her right to elect to take
against the respondent’s father’s will, which left everything to the
respondent and his brother). The misconduct which led to the respondent’s
suspension in 1998 is remarkably similar to this matter – the respondent
provided legal advice in an improper manner to the detriment of the person
he advised and for his own pecuniary gain. The respondent’s continuing
disregard for the ethical strictures placed on attorneys renders him a risk
to the public and justifies a significant period of suspension.
It is, therefore, ordered that the respondent is hereby suspended from
the practice of law in Indiana for at least 24 months, beginning March 12,
2001. At the conclusion of that period, he may not be reinstated to the
practice of law except upon a successful petition pursuant to Ind.
Admission and Discipline Rule 23(4).
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 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.
-----------------------
[1] If the fair market value of the home, as agreed to by the client and
her former husband during the dissolution, is used, the client would have
had approximately $22,000 in equity. However, the respondent disputed the
value of the home, suggesting that it may have declined following the
appraisal, as the home was condemned at one point for lack of running
water.
[2] Prof.Cond.R. 1.4(a) provides:
A lawyer shall keep a client reasonably informed about the
status
of a matter and promptly comply with reasonable requests for
information.
[3] Prof.Cond.R. 1.4(b) provides:
A lawyer shall explain a matter to the extent reasonably
necessary to
permit the client to make informed decisions regarding the
respresentation.
[4]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;
3) the client consents in writing thereto.
The respondent argues that the client’s signature on the agreement
constitutes her written consent within the meaning of Prof.Cond.R. 1.8(a).
That rule contemplates the written consent of the client to the transaction
after full disclosure. The client’s signature on documents on documents
transferring property to the client’s attorney cannot be considered
“written consent” under Prof.Cond.R. 1.8(a) where the client has not been
informed of the implications or terms of the transaction as required by
that rule.
Indeed, the client testified that she would never have entered into the
transactions at issue in this case if she had known that the respondent
intended to retain all profits from the sale of her home. She testified
that at the time she signed the documents at issue, she believed she was
agreeing to the sale of the property by the respondent and the payment of
any profit to her, after subtraction of the attorney fees obligation.
Hearing Transcript, p. 54. Prof.Cond.R. 1.8(a) is specifically designed to
protect against such misunderstandings by requiring full, written
disclosure of the terms of the transaction and the client’s consent
thereto.
[5] The Commission initially charged the respondent with violating
Ind.Prof. Cond. R. 1.5(a) by charging an unreasonable fee when he billed
the client more than $900 for telephone calls from the client, including
$30 for each message the client left with the respondent’s secretary. The
facts of this case may have supported that finding, as well as other
violations of that rule.