In Re the Discipline of Dorothy
2000 SD 23, 605 N.W.2d 493, 2000 S.D. LEXIS 19 (2000)
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Rule of Law:
An attorney's fees must be reasonable according to the factors outlined in Rule 1.5 of the Rules of Professional Conduct, and attorneys have a strict duty to promptly notify clients of and deliver funds received on their behalf, and to exercise candor towards the tribunal and respect for the judicial system.
Facts:
- On September 3, 1993, Thayer Hoover contacted Charles L. Dorothy for child support guideline information regarding his wife Cindy's four children from a previous marriage to Mike Grages, and Dorothy received a $500 retainer from Hoover without a written fee agreement.
- In December 1993, Dorothy represented to Cindy Hoover that the case could cost as much as $10,000.
- As of August 1994, the Hoovers had paid Dorothy $47,300 in legal fees and costs for the child custody and support proceedings, requiring them to borrow $10,000 from a bank and take an $8,000 cash advance on their Visa card. Ultimately, Dorothy claimed he was entitled to $62,650.72.
- In 1992, Richard C. Flugge retained Dorothy to represent him in a legal dispute with Steven Wagner, an accountant whose employment Flugge terminated, concerning the recovery of client files taken by Wagner.
- On August 24, 1994, Wagner's attorney, Gale Fischer, mailed Dorothy a trust account check for $455.72 along with a satisfaction of judgment for Flugge's breach of contract claim.
- On January 22, 1997, Flugge called Dorothy regarding the judgment against Wagner, as he had never been paid.
- On March 17, 1997, Dorothy advised Flugge he had never received the $455.72 check from Fischer and discussed possible ethics violations by Fischer.
- Prior to a court hearing, Dorothy discovered the August 24, 1994 trust account check in his 'appellate file' but failed to explain to Flugge that it was the payment for the judgment.
- After Dorothy publicly revealed he had received the check, he later claimed a possessory attorney's lien on the original constable's check and a reissued cashier's check for $455.72, refusing to endorse them over to Flugge until a billing dispute was resolved.
- Dorothy terminated his professional relationship with Flugge on April 18, 1997, and sought a mutual release of all attorneys involved without advising Flugge to obtain independent legal representation.
Procedural Posture:
- Charles L. Dorothy brought suit against Thayer and Cindy Hoovers for over $14,000 of claimed unpaid legal services and costs related to the custody proceedings.
- Judge Tim D. Tucker granted judgment in favor of the Hoovers in Dorothy's suit for unpaid legal services. Dorothy did not appeal this ruling.
- Subsequently, the Hoovers filed an ethical complaint against Dorothy with the State Bar of South Dakota.
- Richard C. Flugge filed an ethical complaint against Dorothy with the State Bar of South Dakota.
- The Disciplinary Board of the State Bar of South Dakota found Dorothy violated several South Dakota Rules of Professional Conduct (Rules 1.1, 1.2(e), 1.3, 1.4, 1.5, 1.16, 2.1, and 8.4 regarding the Hoover complaint, and 1.1, 1.2(a), 1.5, 1.8(h), 2.1, and 8.4 regarding the Flugge complaint) and recommended public censure.
- On May 8, 1998, the South Dakota Supreme Court appointed Circuit Judge Jack Von Wald as referee to take evidence and make findings concerning the disciplinary case.
- The referee agreed with the Board that Dorothy violated the cited Rules of Professional Conduct but recommended a private reprimand.
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Issue:
1. Does an attorney charge unreasonable fees in violation of professional conduct rules when the billed amount is disproportionate to the services rendered in a child custody and support case, the attorney engages in unnecessary tactics, and fails to adequately explain billing practices? 2. Does an attorney violate professional conduct rules by withholding a client's settlement funds, failing to promptly notify the client of receipt, and falsely denying receipt of funds, while also demonstrating a lack of candor and making unsupported criticisms of judges during disciplinary proceedings?
Opinions:
Majority - Gilbertson, Justice
Yes, Dorothy charged unreasonable fees and violated professional conduct rules, and yes, he violated rules by withholding client funds and demonstrating a lack of candor. The Court adopted the Board and referee's findings that Dorothy violated Rules 1.1 (competence), 1.2(e) (advising client of limitations), 1.3 (diligence), 1.4 (keeping client informed), 1.5 (unreasonable fees), 1.16 (withdrawal), 2.1 (independent judgment), and 8.4 (misconduct) concerning the Hoover complaint. This case presented a matter of first impression in South Dakota regarding disciplinary action for unreasonable fees. The Court reiterated that Rule 1.5, requiring fees to be 'reasonable,' imposes a stricter standard than the previous 'clearly excessive' test, and that a fee agreement is not an ordinary business contract, thus fees must be reasonably proportional to services. Dorothy's tactics complicated and extended proceedings, resulting in fees vastly exceeding those of opposing counsel, and he failed to provide a written fee agreement (Rule 1.5(b)) or properly advise Cindy Hoover. The Court cited Ofstad v. Beck (1937), emphasizing its duty to protect the public from unconscionable dealings by attorneys. Regarding the Flugge complaint, Dorothy violated Rule 1.15(2)(d) and 1.15(b) by failing to promptly notify Flugge of the $455.72 trust account check received in 1994, leading to unnecessary execution proceedings in 1997. His subsequent denial of receiving the check and then claiming an unperfected possessory attorney's lien was improper. Rule 1.15(c) dictates that disputed funds must be kept separate, not used for leverage. Furthermore, Dorothy violated Rule 3.3 (candor toward the tribunal) by misrepresenting witness testimony and making unsupported, inflammatory criticisms of various judges and the judicial system during the disciplinary proceedings. His refusal to acknowledge wrongdoing was a significant factor in determining discipline. Based on the totality of circumstances, including the misconduct, lack of remorse, and lack of candor, the Court imposed public censure and ordered Dorothy to pay all costs of the proceeding.
Concurring - Sabers, Justice
Justice Sabers concurred, stating that Dorothy's conduct, his lack of remorse, and his insistence that he did nothing wrong clearly justified public censure, noting that his actions brought him dangerously close to suspension. She further commented that Dorothy's conduct demonstrated an ability to 'place a spin on the 'facts' which may be brilliant legal gymnastics,' but also a 'lack of professional judgment for such a seasoned lawyer,' especially in his criticism of circuit court judges.
Concurring - Amundson, Justice
Justice Amundson concurred, specifically addressing Dorothy's self-representation and his use of psychological mechanisms ('selective perception' and 'cognitive dissonance') to explain the referee's decision. He reiterated that the final decision on attorney discipline rests with the Supreme Court, not with expert witnesses, though their testimony can be considered. He compared Dorothy's case to several prior public censure cases, emphasizing the importance of admitting wrongdoing and cooperating with the disciplinary process, qualities largely absent in Dorothy's defense. Justice Amundson concluded that despite Dorothy's potential disagreement, the decision was impartial and public censure was a justified minimum imposition.
Analysis:
This case is significant as it clarifies and reinforces the standard for attorney fees in South Dakota under Rule 1.5, moving from a 'clearly excessive' to a 'reasonable' threshold for disciplinary action. It strongly emphasizes an attorney's duty of promptness and transparency in handling client funds, explicitly prohibiting the use of such funds as leverage in fee disputes without proper legal basis. Furthermore, the ruling underscores the critical importance of candor to the tribunal and respect for the judiciary, indicating that unsupported attacks on judges or the judicial system, coupled with a lack of remorse, will be viewed as serious ethical violations leading to more severe discipline.
