Board of Overseers of the Bar v. Scott G. Adams, Esq.
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Docket No.: GCF# 11-277
Issued by: Grievance Commission
Date: August 15, 2013
Respondent: Scott G. Adams, Esq.
Bar Number: 008019
Order: Dismissal with Warning
Disposition/Conduct: Failure to promptly refund unearned funds to a third party (a trust beneficiary)
REPORT OF FINDINGS AND ORDER OF PANEL C
The above matter came before GCF Panel C pursuant to a Disciplinary Petition dated October l5, 2012. Proper notice being provided, a public disciplinary hearing was conducted pursuant to M. Bar. R. 7.1(e)(1) on July 17, 2013 at the Cumberland County Superior Courthouse. The Petitioner was represented by Assistant Bar Counsel Aria Eee. The Respondent appeared pro se. The parties agreed to the composition of the panel.
The matter arises from a grievance complaint filed by Micah Herman of Kansas City, Missouri on August 30, 2011.
Micah Herman, Vanessa Herman (Mr. Herman's wife and a practicing attorney in Missouri), and Attorney Adams testified at the hearing.
Attorney Adams was admitted to the bar in 1994 and works as a solo practitioner in East Boothbay, Maine. He is also licensed to practice in Virginia, Maryland and the District of Columbia.
Attorney Adams served as trustee of the Nola P. Herman Trust from December 2000 until September 2009. The Settlor of the Trust was Mr. Herman's mother.
Mr. Herman was the primary beneficiary of the Trust
Pursuant to the terms of the Trust, the Trust was to terminate when Mr. Herman reached the age of thirty five (35).
Prior to September 26, 2009 (Mr. Herman's 35'h birthday) Attorney Adams resigned and appointed Micah Herman as successor trustee.
Attorney Adams turned over all but $10,000 to Mr. Herman. He retained $10,000 in a checking account to cover any future services and expenses related to the transfer of trustee responsibilities.
The Panel finds that Mr. Herman initially authorized Attorney Adams to reserve those funds for that purpose.
On October 30, 2009, Attorney Adams returned to Mr. Herman an additional $8,000.00, thereby reducing the remaining balance to $2,098.80. In the letter forwarding the check, Attorney Adams stated, "l am retaining the balance [of] $2,098.80 to cover any additional transition costs through the end of the year and will close the account and forward you any unused balance once the returns have been completed for 2009."
On April 1, 2010, Mrs. Vanessa Herman (Micah Herman's wife and a licensed Missouri attorney) contacted Attorney Adams. At that time, she inquired about the balance of the Trust bank account, the associated bank statements, other Trust related documents and the status of the unreturned Trust funds. She also authorized Attorney Adams to close the account after deducting fees and expenses from the account.
In response to the request from Attorney Herman, Attorney Adams stated, "I will close that account and distribute the remaining funds once I have been provided a final tax return for the Trust that will document that the Trust is no longer in my control and that all federal and state filing for 2009 have been completed."
At the grievance hearing Attorney Adams testified that he requested a copy of the tax returns or some other proof that they had been filed because he had been trustee of the Trust for most of 2009 and was concerned that his name was still on the paperwork on file with the IRS.
Attorney Adams eventually returned the balance of the account, minus his fees and expenses, on October 30, 2012.
Attorney Adams charged Mr. Herman $1908.21 for his services and expenses. Attorney Adams sent Mr. Herman a check for $673.21 representing the balance due after deducting his fees.
Attorney Adams charged Mr. Herman $260 to prepare a release that Mr. Herman did not request execute or authorize.
- In its Disciplinary Petition, the Board alleges violation M.R. Prof. Conduct 1.5(a); 1.15(d)(f) and 8.4(a)(c)(d).
- Rule 1.5 requires that the attorney not charge or collect an unreasonable fee. With one exception, the Panel finds that Attorney Adams did not charge or collect an unreasonable fee. Attorney Adams charged $125.00 per hour, which is the same rate that he charged when he executed his fee arrangement with the Settlor of the Trust in March of 2000. Mr. and Mrs. Herman authorized Attorney Adams to charge for services in connection with transitioning from being trustee and finalizing the accounting during his tenure as Trustee. The Panel finds, however, that the $260 Attorney Adams charged for preparing the release was an unreasonable fee because the work was not specifically authorized and was not reasonably within the scope of services that had been authorized. The remaining services and charges do not constitute an unreasonable fee.
- Rule 1.15(d) requires a lawyer to "promptly deliver to the client or third party" any funds that the client or third party is "entitled to receive." According to Attorney Adams, he did not know what funds Mr. Herman was entitled to receive because he was not sure whether he would be required to perform additional services and expend costs in connection with the transfer of Trust responsibilities and the closing of the Trust.
- The Panel credits Attorney Adams' testimony that it is customary to provide information, assistance and services in connection with transferring Trust responsibilities and closing a Trust. The Panel also finds, however, that at some point in the continuum between resigning as Trustee and refunding the balance of the monies to Mr. Herman, it should have become apparent to Attorney Adams that this was not a typical situation and that he was not going to be required to perform any additional work. At that point, Attorney Adams should have promptly refunded the funds, minus his fees for services.
- Contrary to the requirement of Rule 1.15(d), the refund was not prompt. The delay in issuing a refund was due to a lapse in judgment by Attorney Adams who held the subjective belief that Mr. Herman would not file the 2009 tax returns. Attorney Adams appears to have formed this belief based on various disagreements between Attorney Adams and Mr. Herman concerning financial issues during Attorney Adams' tenure as trustee. While this history may provide an explanation for Attorney Adams' beliefs, it does not excuse his failure to promptly refund the funds that had been withheld. Attorney Adams was no longer the trustee and it was improper for him to condition return of the funds on proof of the tax return filing.
- Similarly, while it is regrettable that Mr. and Mrs. Herman did not provide consistent and clear communication to Attorney Adams, and chose not to resolve the dispute by simply providing Attorney Adams with the confirmation he requested,1 that did not relieve Attorney Adams of his responsibility to promptly refund the retained monies once it became clear that he would be doing no further work and that retaining the funds was no longer authorized.
- For these reasons, the Panel concludes that Attorney Adams' conduct violated Rule 1.5(a) and 1.15(d).
- The Panel finds that Attorney Adams did not knowingly violate the rules, engage in conduct involving dishonesty, fraud, deceit or misrepresentation or that was prejudicial to the administration of justice and, therefore, did not violate Rule 8.4.
- The Panel finds that Attorney Adams' violation of the rules was due to a lapse in judgment, influenced to some extent by his long and frequently stormy relationship with Mr. Herman.
- Maine Bar Rule 2(a) provides that the purpose of bar disciplinary proceedings is not punishment, but rather the protection of the public from attorneys who, by their conduct, have demonstrated that they are unable to discharge their professional duties properly. Among the factors to be considered in imposing sanctions are: the duty violated, the lawyer's mental state, the actual or potential injury caused by the lawyer’s misconduct and the existence of any aggravating or mitigating circumstances.
- The Panel finds that the misconduct was minor; that there is little or no injury to a client, the public, the legal system, or the profession; that there is little likelihood of repetition by Attorney Adams; and that there were mitigating circumstances based on the historic relationship of Attorney Adams and Mr. Herman. Accordingly, the panel concludes that the appropriate disposition of this case is the issuance of a Dismissal with a Warning to Scott Adams, Esq., which is now hereby issued and imposed upon him pursuant to M. Bar R. 7.1(e)(3)(B)(a).
Martha C. Gaythwaite, Esq. Chair, Panel C
Peter C. Fessenden, Esq.
Richard Dana Public Member
Footnote 1For example, Attorney Herman testified that she did not intend to send Attorney Adams the tax returns when she represented she would.