Tuesday, December 29, 2009

"A Highly Fluid, Rapidly Changing, And Perhaps Confusing Situation..."

An attorney who had exercised self-help in a dispute over fees with his former law firm was suspended for 90 days by the Wisconsin Supreme Court. The court accepted the referee's findings of the following facts:

These disciplinary proceedings arise from Attorney Maynard's billings and payments received for services he performed as a shareholder with his former law firm from August 1, 2005, through June 30, 2006.  On August 1, 2005, Attorney Maynard joined with Attorneys Bruce McIlnay, James Button, and James Schmitt in the law firm of Maier, McIlnay, Schmitt & Button, Ltd.  Soon after, the firm became known as Maynard, McIlnay, Schmitt & Button and used the acronym of MMSB or MMS&B.  The referee found that the individuals understood the firm to be a corporation and regarded one another as shareholders.  The referee found that when Attorney Maynard became a shareholder at MMS&B, he entered a highly fluid, rapidly changing, and perhaps confusing situation with little discussion among the other shareholders regarding their rights or obligations to the firm.  The firm's shareholders testified generally that the money received from clients was "firm income"; the question of how the money would thereafter be divided was never discussed. 

The referee found the shareholders intended to practice law in an arrangement through which expenses were to be incurred and paid by the corporate entity and revenues were to be paid to and distributed by that entity.  The referee found:

In particular, [Attorney] Maynard did understand that, during the period of his association with the Firm, invoices for legal services were to be transmitted under the Firm's name, and paid to, and then distributed by the Firm, to its creditors and shareholders, in a manner to be determined.

Attorney Maynard's compensation plan was similar to the other shareholders' plans, consisting of a draw plus a monthly bonus.  On or about January 1, 2006, Attorney Maynard's monthly compensation was substantially reduced.  When Attorney Maynard announced in the spring of 2006 he would be leaving the firm, he was offered, and agreed to, the opportunity to remain with the firm "of counsel."  The referee found that despite the absence of a formal signed agreement, from at least July 1, 2006, until the final parting of ways in February 2007, Attorney Maynard and the firm both understood he was no longer a shareholder but was to have "of counsel" status. 

As of July 2006 there remained some open matters on which Attorney Maynard had worked as a shareholder but had not yet been billed.  From July 2006 through October 2006 Attorney Maynard transmitted invoices to three clients for legal services he had rendered while he was a shareholder.  The invoices all stated, "PLEASE MAIL YOUR PAYMENT TO: MMS&B, P.O. BOX 253, GRAFTON, WI 53024 IN THE ENVELOPE PROVIDED."

Without informing anyone connected with the law firm, Attorney Maynard applied for a post office box, inscribing the form with "John R. Maynard Principal" as the applicant and "MMS&B" as the name to which the box number was to be assigned.  The address he gave for the box holder was apparently that of his personal residence.  Other firm members did not know Attorney Maynard had opened this post office box.  The referee found the invoices were misleading in that they indicated MMS&B would be receiving the money, while only Attorney Maynard knew of and had access to the post office box.

In response to the misleading invoices he sent, Attorney Maynard personally received and deposited into his personal checking account payments from clients totaling $7,776.84.  Attorney Maynard did not inform the firm he had received these funds and the firm did not receive any of these funds.  The firm did not learn of the post office box or of Attorney Maynard's receipt of the funds until much later as a result of its own efforts.

One check that Attorney Maynard received had been made out to the firm.  Although no longer a shareholder but "of counsel," he endorsed the check and kept the proceeds.  He had no express authority from the firm to do so; he made the endorsement and kept the money without the firm's knowledge.  The referee found that by his testimony, Attorney Maynard acknowledged and understood the money billed for the work he performed as a shareholder was firm income to be divided among all the shareholders after the payment of overhead.  The referee concluded that by receiving the funds for services performed while a shareholder, but not notifying the firm about the receipt of those funds and not delivering those funds to the firm or at least to a trustee, the court, or an arbiter, Attorney Maynard violated former SCR 20:1.15(d)(1), as charged...

The referee rejected the proffered defense that the attorney had been "drastically underpaid" and that the fees related to work he had done for his clients. (Mike Frisch)


Bar Discipline & Process | Permalink

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