Board of Overseers of the Bar v. Gene R. Libby, Esq.
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Docket No.: GCF# 17-200
Issued by: Grievance Commission
Date: February 7, 2019
Respondent: Gene R. Libby, Esq.
Bar Number: 000427
M. Bar R. 13(e)(9)
On December 17, 2018, with due notice, Panel E of the Grievance Commission (Panel) conducted a public disciplinary hearing in Courtroom 9 of the Cumberland County Courthouse pursuant to Maine Bar Rule 13(e)(8), concerning alleged misconduct by the Respondent, Gene R. Libby, Esq. This disciplinary proceeding had been commenced by the filing of a Formal Disciplinary Charges Petition by the Maine Board of Overseers of the Bar (Board) on August 20, 2018.
At the hearing, the Respondent was represented by James M. Bowie, Esq., and the Board was represented by Assistant Bar Counsel Alan P. Kelley, Esq. The Panel admitted without objection the Boards previously submitted Exhibits 1 to 23, the Boards newly introduced Exhibit 24, and the Respondents previously submitted Exhibits 1 to 15.1 The Panel heard the sworn testimony of Jeffrey Bennett, Esq., Gene R. Libby, Esq., and Kristin A. Gustafson, Esq.
Due to time constraints at the hearing, the Panel Chair directed the parties to submit closing arguments in writing. Each party filed closing arguments on January 2, 2019, at which time the hearing officially closed.2
The Panel then conferred telephonically to evaluate the documentary and testimonial evidence admitted.
Respondent Gene R. Libby, Esq. of Kennebunk, Maine has been at all relevant times an attorney duly admitted to and engaging in the practice of law in the State of Maine and subject to the Maine Bar Rules, including the Maine Rules of Professional Conduct.
On May 24, 2016, Attorney Libby filed in Portland District Court a Divorce Complaint for his client Ann-Charlotte Deutsch, a real estate broker, against her husband Dr. Robert Deutsch, a chiropractor. Included with his filing was a Family Matter Summons and Preliminary Injunction. The injunction applied to Ms. Deutsch from the commencement of the action and to her husband when the divorce paperwork was served on him. Included in the filing was a Motion Pending, seeking interim spousal support and payment of Attorney Libbys attorneys fees, which was never acted upon by the court. Initially, Attorney Robert Mittel represented Dr. Deutsch in the divorce action. At a later point, Attorney Jeffrey Bennett and Attorney Joan Egdall with the Legal-Ease law firm replaced Attorney Mittel.
On March 23, 2017, counsel for the parties had a pretrial status conference with the court, which declined to grant Ms. Deutschs request for attorney fees at that point in time. Without permission from the court or opposing counsel, Attorney Libby advised Ms. Deutsch to transfer $70,605 from a joint savings account at Bath Savings Institution to her personal checking account at the same bank. On April 3, 2017, at a deposition of Ms. Deutsch, Attorney Bennett learned that she had withdrawn and transferred the money out of the joint account. Attorney Bennett then filed a Motion for Contempt dated April 17, 2017, arguing that this transfer of money violated the Preliminary Injunction. The court never ruled on this Motion. On April 25, 2017, Ms. Deutsch paid Attorney Libby $9,000 for legal fees from the transferred money.
While the divorce proceedings were still underway, on May 5, 2017, Attorney Bennett and Attorney Joan Egdall filed a bar complaint against Attorney Libby regarding the transfer of funds. The Board delayed opening a bar investigation of Attorney Libby until after the divorce concluded. The parties resolved the divorce by agreement and the checking account at Bath Savings Institution was awarded to Ms. Deutsch as part of the settlement.
In a Formal Disciplinary Charges Petition dated August 20, 2018, the Board alleged that Attorney Libby violated the following Rules of the Maine Rules of Professional Conduct: 1.7 Conflict-of-Interest: Current Clients, 3.3 Candor Towards the Tribunal, 3.4 Fairness to Opposing Party and Counsel, and 8.4 Misconduct.
The heart of the Boards complaint is that Attorney Libby counseled his client to violate the Preliminary Injunction and thus the law by having her withdraw funds from a joint bank account without permission from the court or opposing counsel so that she could pay his legal fees.
The relevant portion of the Preliminary Injunction statute is spelled out in Title 19-A M.R.S. § 903 (l)(B), which states:
The preliminary injunction must be directed to each party to the [divorce] action and must contain the following orders:
That each party is enjoined from transferring, encumbering, concealing, selling or otherwise disposing of the property of either or both of the parties, except in the usual course of business or for the necessities of life, without the written consent of the parties or the permission of the court; [emphasis added].
There is no dispute that the Preliminary Injunction applied to both parties in the divorce. Nor is there disagreement that Ms. Deutsch transferred marital funds from a joint account to her own personal account. The Board points out that the Stipulated Report of Findings and Order of Panel E of the Grievance Commission in Board v. Van Dyke, GCF-14-476, found that an attorney failed to properly counsel a divorce client, who transferred funds from the marital estate to herself and a third party without permission, which a court determined was a violation of the Preliminary Injunction. That matter is distinguishable from the present case because Ms. Deutsch did not transfer funds to herself and a third party, potentially putting the funds outside of the control of the divorce court, nor is there evidence that she failed to limit her spending to the necessities of life, nor did she lie in her discovery responses or fail to identify financial accounts. Similarly, the Board cites King v. King, 2013 ME 56, ¶6, ¶9, 66 A.3d 593, which the Panel finds is distinguishable from the present case because the transfer of marital assets was to a third party. In this case, Attorney Libby specifically advised his client, who was financially insecure because her husband controlled most of the finances and had stopped making payments to her, that she could transfer funds so that she could pay her legal fees as called for in a written contract.
Assuming without deciding that the transfer from the joint savings account to the sole personal checking account was a "transfer" for purposes of the Preliminary Injunction, the controlling question is whether this transfer was for the payment of the necessities of life, which is not defined in the statute and the case law. Hence, the Panel had to draw on common sense principles, which dictate that certain types of expenditures qualify as "necessities of life" such as food, shelter, and medical care. Even these categories, however, are not clear-cut because the statute does not indicate how much money one can spend on such a necessity. Depending on the circumstances of the party, a necessity of life may or may not involve eating a meal at a fine dining establishment such as Fore Street Restaurant in Portlands Old Port, staying at boutique lodging such as the Black Point Inn at Prouts Neck in Scarborough, having elective medical procedure such as LASIK eye surgery as opposed to just buying prescription glasses at the Maine Mall, or visiting a child in Hawaii as Dr. Deutsch actually did during the pendency of the divorce. A necessity of life for Stephen King, the famous author of Carrie and other horror stories who lives in Bangor, might be a Waterman fountain pen hand assembled in France. Arguably, a necessity of life for Joan Benoit Samuelson, the first female gold medalist in the marathon event at the 1984 Summer Los Angeles Olympics who resides in Freeport, might be custom running shoes made by Nike. A person temporarily residing in the Oxford Street Shelter in Portland might need a pay-as-you-go cell phone plan from T-Mobile to survive and find a job.
Perhaps the legislature was wise not to define the term "necessities of life", because it would thwart the equitable nature of divorce proceedings and the ability of the court to balance those equities. The evidence shows that Dr. Deutsch, who had access to unrestricted funds for his legal fees, stopped making deposits to the bank account that Ms. Deutsch used to pay her legal fees and other living expenses. Expert Witness Kristin Gustafson, Esq., who has exclusively been practicing family law since 1992 and was a former member of the legislatively-created Maine Family Law Advisory Commission, opined at the hearing that Ms. Deutschs transfer did not violate the preliminary injunction
[b]ecause it was not a transfer that took the asset outside the jurisdiction of the marital estate. It was a transfer from a joint account of the marriage to an individual account of the marriage that would be fully accounted for in the ultimate distribution, much as Mr. Deutschs accounts that he was spending money out of if there was any issue about that there — that would have been fully accounted for.
In the Boards closing argument, it conceded the following: "To the extent that the parties attorneys fees may be considered as necessities of life in this case, the marital injunction would allow for their purchase".
In the Deutsch divorce case, the court never reached the decision of whether or not Ms. Deutschs legal fees were a necessity of life, which places the onus on this Panel to make a determination based on the evidence presented by the parties. The Panel finds that Ms. Deutschs legal fees were a necessity of life for her. Ms. Deutsch was a real estate agent and not an attorney experienced with domestic relations law. Given the complexities of family law involving a $2 million dollar plus marital estate, Ms. Deutsch needed an experienced attorney, especially because her husband initially retained Robert Mittel, Esq., a highly respected family law attorney, to represent him. There is an old saying: you do not go to a potential gunfight without a gun.
Melvyn Zarr, a legendary professor of civil procedure at the University of Maine School of Law, taught generations of students the acronym LLDP, i.e., Law is a Lawyer Driven Process, meaning that it is up to the client's attorney to shape the law procedurally into something useful much as a potter takes clay and turns it into a vase. See Melvyn Zarr, Recollections of My Time in the Civil Rights Movement, 61 Me. L. Rev. 366, 369 (2009). In this case, it was Attorney Libbys ethical duty to diligently solve his clients very real quandary of having her access to funds throttled. See M.R. Prof. Conduct 1.7 cmt. (1) ("A lawyer should pursue a matter on behalf of a client despite opposition, obstruction or personal inconvenience to the lawyer, and take whatever lawful and ethical measures are required to vindicate a clients cause or endeavor.").
Attorney Libby decided not to wait for the court to act upon his Motion Pending because he had a procedural tool, which allowed him to advise his client that she could transfer funds for the payment of the necessities of life. Professor Zarr lectured his students, including many future jurists, that a trial attorneys job is to functionally define the law, i.e., in the present case, make the law favorably bend towards the client, of course, without stepping over any ethical lines. Expert witness Kristin Gustafson confirmed that waiting for the court to act would was not practical because the "the hearing time is so limited for these magistrates and judges who are doing back to back to back dealing with things a lot more important than people that have plenty of money, that it is very difficult to get any kind of hearing time to get this kind of — a request for attorneys fees heard." In other words, in the real world, hearing dates set forth in court orders are not carved in Deer Isle-quarried granite, which is understandable given the court systems limited budgetary resources. Under the circumstances, the facts show that the purpose of Ms. Deutschs transfer of funds from a joint account to her own account was to pay for her necessities of life, which did not run afoul of the Preliminary Injunction.
The Board further argued that Attorney Libby did not have the right to receive his fees in accordance with the terms of his fee agreement until the end of the divorce case. The Panel disagrees with this theory and finds it to violate the heart of Anglo-American contract law, i.e., I perform a service for you and in turn you agree to pay me in a timely fashion. Furthermore, while Rule 1.5 of the Maine Rules of Professional Conduct makes it unethical for an attorney to collect an unreasonable fee, it is silent about demanding prompt payment from a client. Practically speaking, Attorney Libby incurred his own costs such as support staff, not to mention more mundane ones such as electricity and internet to provide legal services to Ms. Deutsch. Attorney Libby would violate state and federal labor law by failing to pay his support staff. See, e.g., 26 M.R.S. § 621-A., regarding timely and full payment of wages. The legal industry would break down if the payment of a clients legal fees was treated as something that could be deferred to an uncertain future date in spite of contractual terms.
In general, people and businesses have the right to be paid for their services or not provide them. Attorney Libby could have filed a motion with the court to withdraw from the case if he was not timely paid. See M.R. Prof. Conduct 1.16(b)(6), which allows an attorney to withdraw if the representation causes an unreasonable financial burden on the attorney. This would have forced Ms. Deutsch to hire new counsel, costing her even more money to bring another attorney up to speed. It is not for this Panel to second-guess Ms. Deutschs decision to hire Attorney Libby for her divorce and enter into a service for fee agreement with him. The Panel determined that Attorney Libby has no conflict by requesting that he be timely paid; if that were the case, most members of the bar would have an inherent conflict with their clients by demanding that they promptly pay their bills.
The Board also argued in closing that Attorney Libby improperly charged Ms. Deutsch for work done to defend himself against the bar complaint. See Formal Ethics Opinion #139, Charging Client for Defending Attorney Before Board of Overseers of the Bar issued June 1, 1994, which concluded that the charging of such fees is per se unreasonable. Attorney Libby testified billing his client for this work was an oversight and that he subsequently wrote off these fees. There appears to be a dispute about the timing of the write-off. The Panel did not consider this alleged violation of Rule 1.5 of the Maine Rules of Professional Conduct because the Board failed to put Attorney Libby on notice of any such violation in its Formal Disciplinary Charges Petition dated August 20, 2018. See M. Bar R. 13(e) detailing the process of a Formal Charges Hearing ("If a matter is to be resolved by a formal proceeding, Bar Counsel shall prepare formal charges in writing that give fair and adequate notice of the nature of the alleged misconduct.").
Based upon the evidence presented at hearing and the written closing arguments of the parties, Panel E unanimously concludes that the Board has not proven by a preponderance of the evidence that Attorney Libby has engaged in misconduct subject to sanction under the Maine Rules of Professional Conduct. Accordingly, pursuant to M. Bar R. 13(e)(10)(A), the Formal Disciplinary Charges Petition filed against Attorney Libby is dismissed.
Date: February 7, 2019
Andre J. Hungerford, Esq., Acting Panel Chair
Gretchen L. Jones, Esq., Panel Member
Malcolm T. Dow, Public Member
1The Respondent also submitted a redacted version of its Exhibit 15 for the public record.
2On January 4, 2019, the Respondent filed a "Rebuttal" to the Boards closing argument, and then the Board submitted a letter asking the Panel to clarify whether it would accept Respondents "Rebuttal." By Order dated January 11, 2019, Panel Chair Andre J. Hungerford responded that the Panel would not consider additional commentary or material from either party. The Respondents "Rebuttal" was not reviewed by the Panel or factored into its decision.