FOR THE RESPONDENT FOR THE INDIANA SUPREME COURT
DISCIPLINARY COMMISSION
Samuel J. Goodman Donald R. Lundberg, Executive
Secretary
9013 Indianapolis Blvd. Seth Pruden, Staff Attorney
Highland, IN 46322 115 West Washington Street,
Suite 1060
Indianapolis, IN 46204
IN THE
SUPREME COURT OF INDIANA
IN THE MATTER OF )
) Case No. 45S00-9712-DI-655
PETER L. BENJAMIN )
_____________________________________________________________________
DISCIPLINARY ACTION
____________________________________________________________________
November 9, 1999
Per Curiam
The respondent, Peter L. Benjamin, retained an unreasonable attorney
fee from the settlement of a medical malpractice claim in reliance on an
incomplete fee agreement with his client. Today we approve a Statement of
Circumstances and Conditional Agreement for Discipline between the
respondent and the Indiana Supreme Court Disciplinary Commission which will
result in our public reprimand of the respondent for engaging in this
professional misconduct. See Ind. Admission and Discipline Rule 23,
Section 11.
As a preliminary matter, we note the respondent was admitted to
practice law in this state in 1978. Therefore, he is subject to the
disciplinary authority of this Court.
The undisputed facts are that in July 1992, the husband of the
respondent’s client died while undergoing treatment at a Fort Wayne
hospital. In January 1993, the client hired an attorney who shared office
space with the respondent to pursue a medical malpractice action against
the hospital. The attorney prepared a written fee agreement in which he
would receive “40 % of total recovery not to exceed attorney fee of 200,00
(sic).”
The respondent and the attorney subsequently formed a partnership to
practice law. No new fee agreement was drafted. When that partnership was
dissolved in May 1995, the respondent retained the client’s case in his
office. The respondent and the client did not enter into a new fee
agreement; instead, the respondent proceeded under the fee agreement signed
by his former partner and the client.
In the summer of 1995, the hospital and the client reached a
settlement wherein the hospital would pay $100,000, its maximum liability
under the Indiana Medical Malpractice Act. The agreement called for an
initial payment of $50,000, with the remaining $50,000 to be paid in
structured payments over a course of years, with interest. Upon receipt of
the $50,000 initial payment, the respondent retained $40,000 (eighty
percent of the total) and forwarded the remaining $10,000 to the client.
Respondent obtained the $40,000 figure by calculating his forty percent
(40%) fee based upon the gross settlement amount of $100,000, rather than
the actual amount forwarded to him ($50,000) or the current value of the
future payments.
In September 1995, the respondent filed a petition with the Indiana
Patient Compensation Fund on behalf of the client for damages in excess of
the hospital’s settlement. In January 1996, a settlement which would
entitle the client to receive $335,000 from the Fund was finalized. Upon
receipt of the Fund settlement check, the respondent retained $134,000,
which was forty percent (40%) of the $335,000. Indiana Code 27-12-18-1
limits the fees an attorney may receive from the Patient Compensation Fund
to fifteen percent (15%) of the recovery -- $50,250 in this case. The fees
retained by the respondent exceeded the statutory limit by $83,750.
The client challenged this distribution. She requested that the
respondent retain only forty percent (40%) of the $100,000 settlement from
the hospital and fifteen percent (15%) of the Fund portion. The respondent
countered by agreeing to pay a refund based on his former partner’s
interpretation of the fee agreement.
Correspondence from the former partner to the client in the early
stages of the litigation indicates the former partner intended that the
forty percent (40%) agreement was to apply only to the non-Fund, or
provider, portion of the settlement. If the Fund also paid damages, the
former partner intended to retain all of the non-Fund portion (one hundred
percent of the $100,000) and fifteen percent (15%) of the Fund portion
pursuant to I.C. 27-12-18-1. In essence, the former partner had intended
to have two (2) separate fee arrangements; one for settlement from the
provider only and another if the client obtained recovery from the Fund as
well.
Using the second fee formula intended by the respondent’s former
partner (but not set out in the fee agreement itself), the respondent
calculated that he was entitled to one hundred percent (100%) of the non-
Fund portion ($100,000 of $100,000) and fifteen percent (15%) of the Fund
portion ($50,250 of $335,000). Thus, the respondent calculated his total
fee at $150,250. As he had retained $174,000 ($40,000 plus $134,000), the
respondent offered to return $23,750, plus interest, to the client.
That result was unacceptable to the client. The respondent thereafter
filed a declaratory judgment action seeking a determination of the
appropriate distribution. While that case was pending, the client and the
respondent agreed to settle the matter, and the respondent returned
approximately $75,000 to the client.
We find, and the parties agree, that the respondent violated Ind.
Professional Conduct Rule 1.5(a) by charging an unreasonable fee.[1] Two
aspects of the respondent’s fee are strongly indicative of its
unreasonableness. First, the respondent retained a fee greater than that
allowed by statute governing recoveries from the Indiana Patient
Compensation Fund. We have held that an attorney’s fee greater than the
presumptive limits established by Indiana regulations governing worker’s
compensation was unreasonable. Matter of Maley, 674 N.E.2d 544, 546 (Ind.
1996). Fee agreements calling for attorney fees in excess of that mandated
by Indiana law also have been found to be void or unenforceable. See,
e.g., Bauer v. Biel, 132 Ind. App. 224, 177 N.E.2d 269 (1961) (agreement to
pay more than presumptive attorney fee in worker’s compensation case held
to be unenforceable).[2]
Also indicative of the fee’s unreasonableness is the respondent’s
retention of forty percent (40%) of the $100,000 initial settlement from
the first payment of only $50,000. The balance was to be paid pursuant to
the terms of a structured settlement. We have held that the retention of a
ten percent (10%) contingency fee from a total structured settlement of
$550,000, where the entire fee was retained from the first two payments of
$50,000 each and where the debtor ultimately defaulted after only $160,000
had been paid, was unreasonable. Matter of Myers, 663 N.E.2d 771 (Ind.
1996). While there is no mention of any subsequent default on the agreed
total settlement in this case, we find under the circumstances of this case
that the respondent’s insistence (in the face of clear opposition from his
client) that he retain his entire contingency fee from the first settlement
payment amounted to exacting an unreasonable fee. We therefore conclude
that the respondent violated Prof.Cond.R. 1.5(a).
We also find, and the parties agree, the respondent violated
Prof.Cond.R. 1.5(c) by failing to set forth the complete method of
calculating fees in the written fee agreement.[3] While the parties have
not provided a copy of the fee agreement to the Court, they agree that the
fee agreement does not contain the entire formula used to calculate the fee
retained by the respondent.
Given our finding of misconduct, we must determine an appropriate
sanction. In making that assessment, we consider the nature of the
misconduct, the lawyer’s state of mind which underlies the misconduct,
actual or potential injury flowing from 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 Lehman, 690 N.E.2d 696 (Ind. 1997).
The parties offer a number of mitigating facts. They agree that the
respondent miscalculated his original fee and neglected to review the
settlement statement prepared by his legal assistant; therefore, they
suggest his acceptance of the original fee was not the product of deceit or
intentional wrongdoing, as evidenced by his filing of the declaratory
judgment action. They also note the respondent has fully cooperated with
the Commission and has settled the fee dispute with his client. They also
state that the respondent recognizes his error with respect to the fee
agreement and has drafted a new fee agreement for use in medical
malpractice cases. Finally, they state that the respondent is remorseful
and that he has never before been disciplined during his twenty (20) years
of practice.
These factors mitigate the severity of respondent’s conduct, but do
not excuse it. The reasonableness of an attorney’s fee is an important
question of public import with broad implications; it has an impact on the
availability of legal services to the public and the administration of
justice, and, ultimately, reflects on the attorney’s status. Myers, 663
N.E.2d at 774. Excessive legal fees may have a chilling effect on the
public’s reliance on the legal system as the means for protecting rights.
Whether the respondent’s actions were the product of omissions or
active deceit, the fact remains that he created the confusion which
surrounded the payment of fees in this case. First, he failed at the time
he took over the client’s case to review the fee agreement which the
respondent’s partner and the client had signed. Cursory review of that
document would have revealed its ethical and practical shortcomings.
Moreover, such review should have prompted the creation of a new fee
agreement consistent with I.C. 27-12-18-1 and the Rules of Professional
Conduct. The respondent’s inappropriate reliance on what turned out to be
an ambiguous and incomplete contingency fee agreement substantially
prompted the confusion regarding his fees.
Second, the respondent ignored the statutory limitation on recovery
from the Fund and retained fees from the settlement far in excess of the
statutory maximum. When the client disputed the fee, the respondent forced
the client into further litigation by initiating a declaratory action to
determine the appropriate distribution of the settlement proceeds. The
respondent did not return the excess funds to the client until after this
disciplinary matter was filed.
The parties suggest a public reprimand is the appropriate sanction for
this misconduct, in light of the mitigating circumstances. We have imposed
such a sanction when faced with substantially similar misconduct. See,
e.g., Myers, supra (public reprimand where attorney retained full
contingency fee from first payment of structured settlement and fee
agreement did not set forth specific method of calculating fee); Maley,
supra, 674 N.E.2d 544 (Ind. 1966) (public reprimand where attorney retained
contingent fee beyond limit set by Worker’s Compensation Act). Given that
precedent and the mitigating factors in this case, we conclude that the
appropriate sanction for respondent’s misconduct is a public reprimand.
It is, therefore, ordered that the respondent, Peter L. Benjamin, is
hereby reprimanded and admonished for the misconduct occurring in this
case.
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]Prof.Cond.R. 1.5(a) provides:
A lawyer’s fee shall be reasonable. The factors to be
considered in
determining the reasonableness of a fee include 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.
[2] Adopting his former partner’s interpretation of the original fee
agreement, the respondent attempted to retain as his fee $100,000 of the
$100,000 settlement from the defendant hospital, in addition to 15 percent
of the recovery from the Indiana Patient Compensation Fund. We find that
approach to be an attempt to circumvent the statute limiting the recovery
allowed from the Fund. By retaining as his fee an unreasonable portion of
the recovery from the settlement with the hospital, the respondent would
have effectively offset the 15 percent limitation on his fee from the Fund
recovery.
We note, in any event, that an attorney’s written disclosure to the
client of the fee and the method by which it is to be determined is of key
importance in avoiding disputes over the reasonableness of a fee.
[3]Prof.Cond.R. 1.5(c) provides:
A fee may be contingent on the outcome of the matter for
which the service is rendered, except in a matter in which
a contingent fee is prohibited by paragraph (d) or other
law. A contingent fee agreement shall be in writing and
shall state the method by which the fee is to be determined,
including the percentage or percentages that shall accrue
to the lawyer in the event of settlement, trial or appeal,
litigation and other expenses to be deducted from the
recovery, and whether such expenses are to be deducted
before or after the contingent fee is calculated. Upon
conclusion of a contingent fee matter, the lawyer shall
provide the client with a written statement stating the
outcome of the matter and, if there is a recovery, showing
the remittance to the client and the method of its
determination.