Thursday, December 11, 2008

Unearned Fees Must Be Escrowed

The Washington Supreme Court imposed an eight month suspension and reprimand of an attorney who had been hired to defend a lawsuit. The attorney deposited the initial retainer of $1,000 in his business account rather than in an escrow account. The attorney claimed the payment was nonrefundable and that his standard retainer agreement contained a provision designating fee payments as nonrefundable. The hearing officer found that the client had not agreed to such an arrangement and had not signed or returned the fee agreement to the lawyer.

Shortly before trial, the lawyer demanded further payment of $2,500 on threat of withdrawl and deposited the resulting payment in the business account. The hearing officer found that the lawyer had not earned either payment on receipt and had thus violated ethics rules.

When the client filed a bar complaint and the bar sought billing records, the lawyer advised in response that an office burglary "resulted in the loss of the majority of his financial records." In the lawyer's appeal of the hearing officer's misconduct findings, the court concluded:

The burglary of Mr. Cramer's office renders his inability to produce a signed fee agreement inconclusive.  It is possible that the burglar took the fee agreement along with the financial documents.  However, the hearing officer heard the testimony of both parties and made the conclusion that Mr. Cramer gave Mr. Garcia a fee agreement for him to sign and return but that Mr. Garcia never did so. This is a reasonable explanation as to why Mr. Cramer does not have a signed fee agreement from Mr. Garcia.  Based on Mr. Garcia's testimony, the absence of a signed fee agreement, and Mr. Cramer's inability to recollect other details of the initial meeting with Mr. Garcia, the hearing officer's finding that no agreement was reached is supported by substantial evidence.

The court rejected the lawyer's contention that his three instances of prior discipline should not be considered because of remoteness in time. The earlier sanctions were imposed in 1991 and 1994. The court agreed with the hearing officer that the presumptive sanction of an eight month suspension was appropriate. (Mike Frisch)

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